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The New York Times reports (paywall) that despite China’s public calls for flexibility, “senior Beijing officials do not plan to discuss the two biggest requests that the Trump administration has made over the past several months” when they talk to American trade negotiators later this week and are set to take a “hard line.”
Trump’s two big asks are a $100 billion cut in America’s $375 billion annual trade deficit with China and restrictions on Made in China 2025, a $300 billion state subsidy package to supercharge China’s high-tech industries. The New York Times says the answer from Beijing will be no.
“I don’t expect a comprehensive deal whatsoever,” said Ruan Zongze, the executive vice president of the China Institute of International Studies, which is the policy research arm of China’s Foreign Ministry. “I think there is a lot of game playing here.”
Beijing is frustrated with Mr. Trump’s threats to impose tariffs on $150 billion in Chinese goods and dismayed by suggestions in the West that China has a weak bargaining position. Chinese officials think the country’s one-party political system and President Xi Jinping’s enduring grip on power — particularly after the repeal of presidential term limits in March — mean that China can outlast the United States and Mr. Trump in any trade quarrel.
Or as the Times more succinctly put it: “Beijing feels its economy has become big enough and resilient enough to stand up to the United States.”
The U.S. ban of telecom parts manufacturer ZTE has also played into Chinese attitudes of the trade standoff. The Times again:
The ZTE case “has changed a lot of Chinese people’s opinion,” said Mr. Ruan, of the China Institute of International Studies. “In the past, people saw us as interdependent.”
Concerns now turn toward Huawei, another Chinese telecom company that has had problems breaking into the U.S. market due to security concerns. It hasn’t received the same export ban as ZTE, but fears of that happening prompted a wireless market intelligence researcher, Earl Lum, to write: “All Hell is going to Break Loose, China-U.S. trade war about to hit DEFCON 1.”
Meanwhile, U.S. Treasury Secretary Steven Mnuchin, who is going to China to negotiate today, said he is “cautiously optimistic” about the upcoming meetings, according to the Hill.
“President Trump has been very clear for the last year that he is very focused on the trade deficit and we are looking to correct that,” Mnuchin said.
“The president is determined that we have free and fair and reciprocal trade,” Mnuchin added.