News Videos
World
International Edition

Thursday

May 25, 2017

Breaking News, World News and Taiwan News.
About Us
E-Newsletter
Advertise
Contact Us

What's at stake as President Trump sits down with China's Xi

The U.S. and China account for one-third of global economic output, so there is a lot at stake as President Donald Trump meets with his Chinese counterpart Xi Jinping, not least the fate of the world economy over the next few years.

And it is precisely the magnitude of the stakes that has led some to assume that both countries will play it safe and focus on the areas of the relationship that are "win-win" relative to the areas that are more likely to produce conflict.

But there is no guarantee that this will happen. In fact, Trump may have already dealt himself a poor hand thanks to his past rhetoric on trade, which has heightened the political risk that he faces in negotiating with Xi. Perhaps more worryingly, Trump's focus on achieving short-term victories could also tip the balance against the U.S.

At the end of the day the two countries not only drive the world economy but also rely critically on one another, a fact that should moderate the decisions of these two strong-willed leaders. In fact, my research (with fellow economists Giovanni Peri and Gianmarco Ottaviano) has highlighted the economic risks of miscalculating on trade deals, particularly those with developing countries.

A Tricky Trade Balance

Trump has a difficult political balancing act to maintain.

On the one hand, 85 percent of Republicans believe that trade has cost more U.S. jobs than it has created. This group will presumably expect results in raising barriers to U.S. imports, particularly those from China. In fact, there is perhaps no other issue more salient to Trump's base than the perceived harm done to U.S. workers due to international trade, and Trump has been unequivocal in his promises to scale back trade agreements, from NAFTA to the now-rejected Trans-Pacific Partnership.

On the other hand, Trump's more moderate advisers, such as Gary Cohn, head of the National Economic Council, have likely cautioned him that trade is ultimately good for economic growth. And any disruption would be bad both for the U.S. and for Trump's political future.

Having repeatedly (and unrealistically) promised at least 4 percent annual economic growth, Trump must be careful not to inadvertently push the economy into a ditch by abandoning the free trade principles that have made the U.S. one of the richest countries in the world.

Who will "win"? Another potential pitfall for Trump is that the search for a perceived "victory" in the negotiations — something the president typically prizes above all else — is actually more likely to favor Xi.

This is because Xi's grip on power is such that he does not need headline-grabbing wins as Trump does. Instead, he can try to extract more substantive concessions behind the scenes. This suggests that a possible outcome is that the status quo will be effectively maintained. For instance, Xi may be able to walk away with a win by simply avoiding a trade war while also obtaining an implicit promise that the U.S. will look the other way on human rights issues and Chinese regional expansion.

This isn't to say that Trump does not have leverage — his campaign promise to raise import tariffs on China to 45 percent would be a blow to the Chinese economy. And of course the U.S. can always flex its strength in opposition to Chinese interests. But perhaps most unnerving for the Chinese is Trump's unpredictability.

Write a Comment
CAPTCHA Code Image
Type in image code
Change the code
 Receive our promos
 Respond to this email
MOST POPULAR OF THIS SECTION
Subscribe  |   Advertise  |   RSS Feed  |   About Us  |   Career  |   Contact Us
Sitemap  |   Top Stories  |   Taiwan  |   China  |   Business  |   Asia  |   World  |   Sports  |   Life  |   Arts & Leisure  |   Health  |   Editorial  |   Commentary
Travel  |   Movies  |   TV Listings  |   Classifieds  |   Bookstore  |   Getting Around  |   Weather  |   Guide Post  |   Student Post  |   Terms of Use  |   Sitemap
  chinapost search