Trump doubts success in rebalancing US-China trade as talks get underway

Containers seen at the Yangshan Deep Water Port in Shanghai April 24, 2018. — Reuters pic
Containers seen at the Yangshan Deep Water Port in Shanghai April 24, 2018. — Reuters pic

WASHINGTON, May 18 — President Donald Trump said yesterday that China had become "very spoiled" on trade with the United States and cast doubt on the success of his efforts to rebalance the relationship with Beijing as high-stakes US-China negotiations opened in Washington.

Trump, speaking to reporters at the White House, said China had “ripped off” the United States for too long and that he told Chinese President Xi Jinping that “we just can't do that anymore.”

But he praised the efforts of US and Chinese officials to try to rebalance the relationship through trade talks.

“Will that be successful? I tend to doubt it. The reason I doubt it is because China has become very spoiled” with getting its way on trade with the United States, he said.

A second round of talks between senior Trump administration officials and their Chinese counterparts started at the US Treasury yesterday morning, focused on cutting China's US trade surplus and improving intellectual property protections.

Trump has threatened to impose up to US$150 billion (RM594 billion) in punitive tariffs to combat what he says is Beijing's misappropriation of US technology through joint venture requirements and other policies. Beijing has threatened equal retaliation, including tariffs on some of its largest US imports, including aircraft, soybeans and autos.

White House spokeswoman Sarah Sanders said Trump would meet with the head of the Chinese delegation, Vice Premier Liu He, later yesterday.

At the Treasury, next door to the White House, there was little outward sign of the negotiations under way in the building. The ornate Cash Room, where a high-profile US-China economic dialogue meeting was held last July, hosted a different event instead.

At trade talks in Beijing two weeks ago, both sides presented lengthy lists of demands, agreeing only to keep talking.

The Trump administration sought a US$200 billion reduction in China's US$375 billion US goods trade surplus, an end to joint venture requirements that it says coerce technology transfers from American companies and an end to subsidies for advanced technology industries under the “Made in China” 2025 programme.

China demanded that Trump relax crushing restrictions imposed on Chinese telecommunications equipment maker ZTE Corp, and end restrictions on Chinese investments in the United States and sales of high-technology goods to China.

Trump on Sunday wrote on Twitter he would help put ZTE back in business after a Commerce Department ban cut off its supply of US components, forcing it to suspend operations.

Trump told reporters yesterday that Xi had asked him to look into the ZTE situation and he agreed to do so, adding that ZTE buys a lot of parts from US companies. “That’s a lot of business.

"Anything we do with ZTE, it’s just a small component of the overall deal. I can only tell you this: We’re going to come out fine with China. Hopefully, China will be happy, I think we’ll be happy,” Trump said.

Earlier, top White House economic adviser Larry Kudlow told Fox Business Network that the discussion over ZTE was about re-examining the US penalties, not waiving the enforcement action altogether.

China proposal, Trump team rift

Kudlow said the White House expected China to bring a proposal to the talks that would “extend the conversation and permit additional negotiations.”

Derek Scissors, a China scholar at the American Enterprise Institute in Washington, said he anticipated that Liu would offer a package of increased purchases of American agricultural goods and other products to help reduce China's trade surplus.

“My understanding is that, as of Sunday, he was coming here to say, 'We'll buy more US stuff,'” Scissors said, adding that it was unclear whether the package would include new structural reforms such as opening more Chinese business sectors to foreign investment.

But US receptiveness to such an offer could be affected by a growing rift in the administration between Treasury Secretary Steven Mnuchin and Trump trade adviser Peter Navarro.

Navarro, the White House's harshest China critic, was relegated to a supporting role in recent days, administration officials said. The talks are being led by Mnuchin, Commerce Secretary Wilbur Ross and US Trade Representative Robert Lighthizer.

Navarro, author of the book Death by China, has been a major advocate of punitive tariffs on Chinese goods, while Mnuchin has favored a pragmatic approach of deals to cut the trade deficit and to open China's economy to US companies.

The Washington talks will start as the US trade representative finishes up public hearings on the first batch of US tariffs on US$50 billion worth of Chinese goods proposed as punishment for alleged violations of US intellectual rights.

The tariffs, which target Chinese electrical and machinery parts, autos and flat-screen television sets, could take effect in early June, and may be followed by an additional round targeting US$100 billion worth of goods yet to be identified. — Reuters