Nov 10, 2017

Trump in Beijing: Smiles mask growing tensions

Trump shakes hands with China's President Xi Jinping during a press conference at the Great Hall of the People in Beijing. Photo: Nicolas Asfouri / AFP/Getty Images.

President Trump has finished his "state visit plus" to China. General Secretary Xi Jinping, now the most powerful Chinese leader in decades, put on a masterful show of pomp and flattery, including the first dinner in the Forbidden City for a foreign leader since 1949. President Trump returned the flattery, as you would expect a guest to do.

Our thought: Pomp and flattery aside, it is not so clear that Xi played Trump. The administration has a good team of China people. Trump may return to the U.S. and, barring a real breakthrough over the North Korea issue, begin rolling out a tougher policy towards China, especially on trade. Trump has been consistent for decades in his criticism of China and its trade practices, so the last 10 months of relative calm in the U.S.-China relationship seem more an anomaly than the status quo.

The leaders made a big show of announcing $250 billion in deals, but some, including Boeing's $37 billion plane order, were repackaged from deals already announced, while others are MOUs that may never come to fruition. The Chinese are always happy to announce big deals during presidential visits as they are flashy, often non-binding, and do nothing to address the structural barriers.

Sources told me before the trip that the administration's approach to the structural issues was going to be "you know what you need to do" rather than a set of specific asks. Trump delivered that message in his private meetings, and in his public comments on the trade deficit he credited the Chinese and blamed his predecessors:

  • "Both the United States and China will have a more prosperous future if we can achieve a level economic playing field. Right now, unfortunately, it is a very one-sided and unfair one. But β€” but I don't blame China. (Applause.) After all, who can blame a country for being able to take advantage of another country for the benefit of its citizens? I give China great credit"
  • "But, in actuality, I do blame past administrations for allowing this out-of-control trade deficit to take place and to grow. We have to fix this because it just doesn't work for our great American companies, and it doesn't work for our great American workers. It is just not sustainable. I look forward to working toward that goal and to pursuing fair and lasting engagement."

There was no announced progress on North Korea, just a reiteration that both countries want "a complete, verifiable, and permanent denuclearization of the Korean Peninsula".

Bottom line: Xi is also not stupid and while he prefers a constructive relationship with the U.S., the Chinese are prepared for and in fact are expecting more friction with the U.S.

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