US President Donald Trump seems to have an insatiable appetite for profiteering from China.
The US side struck a rich vein in China when Trump stunned the business world last year with deals worth $250 billion during his Nov 8-10 state visit to Beijing. Yet just four months later, on Mar 22, 2018, he announced plans for punitive tariffs on up to $60 billion in annual imports from China.
News of negotiations on possible new deals is understandable. Trump is a talented negotiator, as shown in his merchandise career and his books (such as 1987’s Trump: The Art of the Deal). To him, the many years and rounds of trade talks with China allowed the United States to be “taken advantage of”.
Starting from 2009, the China-US Strategic and Economic Dialogue has been held annually. Each time, the US would play up its accusations against China’s “unfair competition”, such as intellectual property theft or investment restrictions, and each time, the US would receive economic “gifts” or concessions.
US soybeans and Boeing planes received huge orders from China, and US exports to China grow by 11 percent annually, compared with a sluggish 5 percent growth with the world.
Even the yuan’s exchange rate has accommodated US complaints. From 2005 to 2014, the Chinese currency appreciated 27 percent against the US dollar. Since then, the appreciation range has been one of the kernel topics in US-China talks each year, and China completed every appreciation task exactly as promised, to balance the US trade deficit and China surplus.
In 2015, the US changed its yuan policy in bilateral talks with China, so the yuan depreciated to 6.95 in late 2016 and appreciated to 6.3 recently after the dollar index fell.
It is agreed in business circles that the major reason for the rising trade deficit is US restrictions on high-tech exports to China, these being the only Made in the USA products with high added value.
Many experts claim that China should be honored as the US’ best trading partner. China has followed rules set by the US and uses the dollar as the currency of bilateral trade, and the US receives real goods from China to control its inflation while China sends the huge trade surplus back to the US financial market.
China has thrived in a global trade market designed by the US and has played by US-drafted rules. The numerous reports about China’s supposed dilemma in transforming its economic model, and a looming crash in its financial and other sectors, have come to nothing. This has left many US strategists alarmed that a number of Chinese high-tech and manufacturing industries are overtaking those in the US, or will do so in coming years.
The US administration’s psychological advantage over China seems to be turning instead to frustration and anger. And that would explain why the Trump administration is placing economic security on par with military security, while citing China as a strategic competitor.
Unlike many of those engaged in negotiations with the Chinese previously, Trump is not an agent of capital but a capitalist himself. An agent would be satisfied with concessions or gifts from the China side in every round of talks.
The boss, however, is hard to please and will resort to many means, both strategic and tactical. This is the fundamental difference between Trump and his predecessors and a right way of understanding his motivation toward China.
The US is not reconciled to China’s progress. Trump is blaming the trade deficit for wrongs in bilateral business relations. “Fair trade” threats in line with his America First policies may be a multi-targeted strategy, but, the days for negotiating at the point of a gun are long gone in this globalized world.
If Trump wants to do something desperate against a trader that has done the right thing, he will lose badly — both in real market terms and also on moral grounds. If the world’s largest exporter, China, is punished for catching up with the US in certain sectors, then the conflicts picked by Trump and the US will end in self-inflicted wounds.
The author is a researcher of Beijing-based Fengyun Institute of Science, Technology and Strategy.