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Trump has a weak hand in his summit with China's president

Rick Newman

While campaigning last year, Donald Trump pledged to label China a currency manipulator on his first day in office. He hasn’t done that yet, and for good reason—the US trade relationship with China is immensely complicated, and any measure meant to punish China would likely hurt America, too.

Trump will confront these complexities in his much-hyped summit meeting with Chinese president Xi Jinping this week, which seems sure to produce plenty of symbolic pageantry—and little of the action Trump has promised regarding China. Investors will be parsing tweets, statements and communiqués for signs of the trade wars Trump has threatened and hints about action toward China’s problematic client state, North Korea. There will be plenty of clues and signals to interpret. But expect them to signify much less than meets the eye.

“What’s likely is an exchange of general views,” economist Derek Scissors of the American Enterprise Institute tells Yahoo Finance. “The two principals will spend some time around each other. And nothing will happen.”

That would probably be a better outcome than some abrupt change in policy, given how green the Trump administration is on a nation that has confounded many prior efforts to bring it to heel. Trump’s agenda toward China involves two main issues, for now: negotiating “fairer” trade terms with China, and finding new ways to get China to pressure North Korea, which has nuclear weapons and is rapidly developing missiles able to deliver them as far as US territory. China has an agenda, too. President Xi wants to be seen back home as a strong leader deftly managing America’s bombastic new sheriff, and part of his mission is to prevent Trump’s worst threats on trade—such as a 45% tariff on imports to the United States—from happening.

Donald Trump and Xi Jinping

This is more than symbolism. China has grand ambitions to be a world superpower, and that means muscling the United States aside in its own hemisphere and other regions of the world, economically, strategically and militarily.

“Xi is a very confident fellow, and probably thinks he’s going to come in and sort of get one over on President Trump,” China expert Chris Johnson of the Center for Strategic and International Studies said at a recent briefing. “I suspect President Trump thinks he’s going to get one over on President Xi. So it’ll be interesting to see how that dynamic plays out.”

Some analysts have criticized Trump for holding a high-level meeting with his Chinese counterpart much earlier in his presidency than other US presidents have done. Such summit meetings typically involve a cast of hundreds working for months to set the agenda for the meeting, negotiate dozens of tricky issues, arrange possible areas of agreement the two leaders can announce, and manage the optics. The Chinese are expert at this, and undoubtedly have armies of diplomats working on ways to assuage Trump without ceding ground on matters most important to them.

Trump, by contrast, is working with a skeleton staff and little institutional expertise on China. Trump hasn’t even nominated people for key roles at the deputy, under- and assistant-secretary roles at the State, Commerce and Defense departments, so he’ll be working without the seasoned subject-matter experts who typically oversee months of preparations for a summit. Trump’s nominee for US Trade Representative, Robert Lighthizer, isn’t on the job yet either, and probably won’t get a Senate confirmation vote until May. That leaves a few top advisers running the show, such as Secretary of State Rex Tillerson, Commerce Secretary Wilbur Ross and Treasury Secretary Steven Mnuchin.

“There’s an imbalance of preparedness,” Ely Rattner, an Asia expert in the Obama administration, said on a recent podcast for the Council on Foreign Relations. “I’m a little bit worried [the Chinese] may catch some of these guys a little bit off guard.”

Differing policy approaches on China

Trump’s trade policy on China still isn’t clear, either, with at least two White House camps wrestling over different approaches. Trump, as a candidate, called for hard-line protectionist tariffs on cheap Chinese imports that threaten American jobs, a move favored by China hard-liners on Trump’s staff such as economist Peter Navarro and strategic adviser Steve Bannon. But other Trump officials, such as Ross, Mnuchin and Gary Cohn, Trump’s top economic adviser, favor more modest measures less likely to disrupt the status quo. Trump may try to use each faction to his advantage during negotiations with Xi, one as a carrot and one as a stick. But Xi is shrewd and unlikely to bow to threats, whether portentous or empty.

Xi is also likely to arrive with some “deliverables:” announcements meant to seem like a political victory for Trump. These could include new Chinese business investments in politically important states such as Michigan, Wisconsin and Ohio—perhaps in the automotive industry, which Trump has focused on intently. Even though this may be nothing more than rehashed plans already in the works, China reportedly wants the news to be “tweetable,” meaning it will be succinct and clear, with a dollar-figure or job tally attached.

“The Chinese know what they’re doing,” says Rattner. “Hundreds of Chinese diplomats are spending 26 hours a days saying, ‘what do we need to give them?’”

The Eau Palm Beach Resort and Spa where President of China, Xi Jinping will stay is shown in Manalapan, Florida U.S., April 5, 2017. REUTERS/Joe Skipper

The risk for Trump is that he takes the bait and gets distracted from tougher requests the Chinese may be less willing to agree to. Trump advisers such as Ross, for instance, have said Trump doesn’t want trade wars but merely wants China to open its market to more American goods. Trump himself has suggested he’d be happy if the US trade deficit with China—$310 billion in 2016—were substantially lower. But that’s actually a tough ask.

“To really get at the trade imbalance you’re going to have to get China to change its whole economic model,” says Scissors. “They’re not going to do that.”

The more urgent matter for now may be North Korea, which has welcomed Trump into office with a series of provocative missile tests highlighting its increasingly alarming ability to threaten peace in Asia. Trump has signaled a harder line toward North Korea than his predecessor, Barack Obama, but short of a disastrous shooting war, tightening the screws on North Korea requires help from China, which tacitly sustains the rogue nation’s stone-age economy and provides access to global financial markets. Trump, so far, hasn’t said how he’d improve on his predecessors’ policies toward North Korea, and Xi may not be keen to tell him how. The two, undoubtedly, will meet again.


Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman