How trump led the u.s. and china to the brink of a trade war – bloomberg diet for hormone balance

Mnuchin said the administration is “very concerned about forced transfers of technology” and “forced joint ventures” for U.S. companies seeking to do business in China. “These are all the issues we will be discussing,” he said at the Milken conference.

Chinese officials are open to discussing issues including technology transfers, widening access to China’s markets, increasing U.S. imports and Chinese industrial policy, said He Weiwen, deputy director of the Center for China and Globalization in Beijing and a former Commerce Ministry official. They won’t bargain on narrowing Trump’s proposed tariffs or reducing the tariff rates, he said — China has demanded the tariffs be withdrawn altogether.

China’s overall trade and current account surpluses have fallen significantly as a percentage of its gross domestic product since 2007, economists say.


China’s current account surplus declined from 9.9 percent of GDP in 2007 to 1.4 percent in 2017, according to the International Monetary Fund.

The New York Times reported Monday that the Chinese will reject two expected demands from the U.S. delegation: that they cut their trade surplus with the U.S. by $100 billion and curb government subsidies for advanced industries such as artificial intelligence and semiconductors.

Cutting the Chinese trade surplus without raising the U.S. savings rate would simply shift the surplus to other countries such as Vietnam and Bangladesh, O’Neill said. And China won’t abandon its Made in China 2025 plan to subsidize advanced industries, said He, the former Commerce Ministry official.

The stakes could hardly be higher. Together, the U.S. and China account for more than half a trillion dollars in commerce. Companies from Apple Inc. to Ford Motor Co. rely substantially on Chinese suppliers, giving Beijing an additional pressure point to retaliate against U.S. tariffs.

Trump’s predecessor, President Barack Obama, practiced what’s known as “strategic patience” with China, exerting little public pressure on the country to rapidly open its markets to foreign competition. Even Trump’s political opponents give him credit for trying a different approach.

Before the July 19 meeting, Mnuchin had held more than a dozen phone calls and meetings with Chinese officials. Afterward, there were few publicly announced meetings between Mnuchin and the Chinese. He met twice with then-outgoing People’s Bank of China Governor Zhou Xiaochuan on the sidelines of major international summits.

Chinese officials, accustomed to robust engagement with their U.S. counterparts, gradually grew more alarmed after the July meeting. Vice Premier Liu He made a trip to Washington in February with three requests for the Trump administration: Establish a new economic dialog, name a point person on China issues and hand over a specific list of economic demands.

The U.S. did none of those things. Instead, Trump responded by imposing tariffs first on aluminum and steel imports — the U.S. accuses China of dumping the metals into global markets, hurting domestic suppliers — and then proposing levies on a list of more than 1,300 Chinese exports.

Within the Trump administration, there was meanwhile internal confusion and rivalry over the approach to China. Ross had led U.S. efforts to secure trade concessions from China in the early months of Trump’s presidency. But since he failed to close a deal with the Chinese on steel imports, Mnuchin and U.S. Trade Representative Robert Lighthizer have assumed more responsibility for the relationship.

Inside the White House, Trump’s two closest economic advisers hold disparate views on trade. Larry Kudlow, director of the National Economic Council, is a free-trade advocate who has repeatedly described Trump’s tariffs as mere proposals rather than a certainty. White House trade adviser Peter Navarro is a hawk who in 2011 published a book titled “Death by China” that portrays the country as a military and economic enemy.

A breakthrough by Mnuchin’s delegation, which also includes Navarro, Lighthizer and Kudlow, would soothe relations between the countries and calm financial markets that have been in turbulence over the prospect of a trade war. But the outcome is uncertain if the U.S. sticks to hard-line demands the Chinese won’t accept.

Before they departed, Lighthizer tempered expectations. The U.S. and China could “spend the next year developing how we deal with each other over a period of time,” Lighthizer said, adding that the two countries are in the “early stages” of that process.

“The risk is that we remain stuck in escalation mode and we don’t shift to negotiations and defining what we want,” said Michael Smart, managing director at Rock Creek Global Advisors and former trade counsel to Democrats on the Senate Finance Committee. “We simply need to map out a plan and need to bring our allies in. We can’t do this alone.”

At the dawn of Trump’s presidency, the Chinese had reason for at least cautious optimism. Trump had attacked China on the campaign trail as an economic parasite on the U.S. But in one of his administration’s first official actions toward the country, the Treasury Department in April 2017 declined to accuse China of currency manipulation, keeping U.S. policy status quo.

The Xi summit followed, where the two leaders bonded at Trump’s Palm Beach resort. China offered minor concessions welcomed by the Americans, allowing more U.S. beef imports and opening its financial sector to greater U.S. investment. It was the sort of incremental progress the formal Comprehensive Economic Dialogue was designed to encourage.

But by July, Trump was dissatisfied. He didn’t want incremental advances. He wanted a wholesale overhaul of the relationship, with the goal of closing the U.S.’s $337 billion trade deficit with China — by far the largest of any American trading partner, and a major irritant to the president. Frustrating Dialogue

“There was definitely frustration that we weren’t always making progress,” said Nathan Sheets, chief economist for PGIM Fixed Income, who served as Treasury undersecretary for international affairs in the Obama administration until 2017. “In the years that I was at Treasury, I saw an increased concern about the lack of progress in certain areas in terms of Chinese economic reforms, particularly business climate issues in China.”

But without the formal dialog, communications between U.S. and Chinese officials lack routine and coordination. Trump’s brash approach to negotiations, honed in the rough-and-tumble world of New York real estate, meanwhile clashes with Xi’s cautious strategy to open China to global market forces.

Trump’s own trip to China in November was rich in ceremony; Xi flattered his guest with a banquet in the Forbidden City. The business deals the U.S. president announced, however, were almost entirely non-binding agreements that would take years to bear fruit, if ever. Any deal that Mnuchin and his delegation strikes may be just as underwhelming, U.S. trade experts worry — and once Trump realizes it, a trade war could be unavoidable.