China knows how to deal with Trump

China knows that Trump wants "tweetable result", and so they gave him the 100-day plan. According to the report of Financial Times,

Some doubt what can realistically be achieved. “Will Trump even have a full team in place to conduct the negotiations effectively within 100 days, since he does not have either a China strategy or a China-Asia team in place?” asks Steve Tsang, director of the SOAS China Institute in London. “This is at best aspirational.”

Phil Levy wrote in Buying A Little Time On China Trade,

One of the headlines that emerged was official impatience – a 100-day deadline to make notable progress. At the senior leadership level, the Trump administration took office so deeply confused about trade deficits that President Trump had to order a 90-day study. As that will run contemporaneously with the China deadline, they seem unlikely to sort out a strategic vision in time. Meanwhile, the norm of summitry is that the leaders agree on a path and instruct their minions to make it so. The problem is that there is a distinct shortage of Senate-confirmed minions. The normal follow-up would involve Deputy U.S. Trade Representatives and Assistant Secretaries of State shuttling from Washington to Beijing and overseeing arduous discussions about details. It is invariably this sort of preparatory work that allows the leaders to later convene and issue proclamations of success. But President Trump has yet to nominate any Assistant Secretaries of State or Deputy U.S. Trade Representatives. Once nominated, they will require Senate confirmation – a lengthy process that has currently entangled the nominee for U.S. Trade Representative, Robert Lighthizer. Given the paucity of vision among senior officials and the outright paucity of junior officials, the one thing the Trump administration seems to need badly is more time. Yet they emerged from the summit trumpeting tight deadlines.

Still, what the US wants, . . .

According to Andrew Nathan, a Sinologist at Columbia University, plenty of low-hanging fruit is on offer. “US negotiators are pushing on a door that is relatively easy to open when they place a priority on improving the trade balance not by limiting Chinese exports to the US, but by increasing US exports to China,” he said.

China can offer .

China will offer the Trump administration better market access for financial sector investments and US beef exports to help avert a trade war, according to Chinese and US officials involved in talks between the two governments.

Because China knows how to deal with leaders like Trump,

Chinese officials have told visitors to Beijing that they think they can navigate what they expect to be Mr Trump’s transactional approach to the relationship. “They are taking the sort of approach that they take to developing countries: How much will it take to buy you off?” said one person who recently met with policy makers in the Chinese capital.
“It sets up a negotiation process tailor-made for Trump-type announcements about concrete deals for the export of this or the export of that, which make a splash but are too discrete to have a structural effect on the overall US trade deficit,” Prof Nathan said.

On the other hand, Trump Administration is preparing for an executive order focusing on anti-dumping, another short term tool.

The Trump administration is working on an executive order that would initiate investigations into "unfair" product dumping from foreign companies — an action that could lead to tariffs on a wide range of products. These plans are very fluid, and internal disagreements remain about how aggressive this order should be. Here's what I've learned from administration sources:

  • Steel and aluminum will be targeted.
  • Other products, including household appliances, could be targeted as well.
  • If the investigations result in new import duties — as some senior Trump officials believe should happen — it could make some consumer goods more expensive and could hurt the stock prices of American companies that rely on cheap steel imports. A good number of American manufacturing companies, however, could benefit from this hit to their low-cost competitors.

Also by Phil Levy

Former Treasury Secretary Larry Summers argues that many of the Trump administration’s fixations in China trade – such as bilateral trade deficits and currency manipulation – are misguided. There is an opportunity cost to pursuing them. Time spent demonstrating that China is not manipulating its currency is time not spent on more fundamental issues, such as the health of the institutions propping up the global economic system. Summers concludes that the United States and China need a high-level strategic dialogue. This is not a new idea. The Bush administration established a Strategic Economic Dialogue (SED) with China. The Obama administration was inordinately proud of itself for inserting an ampersand and pursuing a Strategic & Economic Dialogue. The reporting did not make clear what the Trump administration’s moniker would be, but there will be high-level dialogues with China. They will be strategic. And economic. The value of such dialogues depends critically on two things – the strategic vision of the lead players, and the ability of more junior officials to lay the groundwork.

As always, battle on trade within the administration continues.

In addition, an official said, the White House is moving out a senior economy policy official, Andrew Quinn, who had helped negotiate the Trans-Pacific Partnership, former President Barack Obama’s signature trade initiative. Mr. Quinn had become the subject of a battle between two camps in the White House: economic nationalists, who wanted him out, and more mainstream backers of free trade, who defended him.

Alas, when China has the upper hand, a trade war is temporarily averted, which would help the US from digging a deeper hole. Who would think of that?