By Clay Chandler and Eamon Barrett
February 2, 2019

In Data Sheet last month, I predicted Donald Trump and Xi Jinping would agree on a trade deal this year—and that it would do little to ease long-term tensions in the US-China relationship. In the wake of Trump’s White House meeting Thursday with Chinese vice-premier Liu He, that seems like a pretty safe bet.

In the brief encounter (the full transcript is here), Trump telegraphed so clearly his eagerness to get to yes that he all but offered Liu the Resolute desk. He touted the “biggest deal ever made”; suggested he’s willing to waive his own March 1 deadline for getting a deal done; gushed repeatedly over the prospect of headline-grabbing Chinese purchases of US soybeans and other farm products to narrow the bilateral trade deficit (“That’s a lot of soybeans. That’s really nice.”); and said next-to-nothing about hard-to-enforce commitments to widen market access for or protect the intellectual property rights of American companies. Trump also hinted he’s open to cutting a side deal involving Huawei Technology as part of a grand trade bargain.

Earlier in the day, Trump tweeted that he wants to close the deal personally. The Wall Street Journal reports Trump responded enthusiastically to a Chinese proposal that he meet with Xi “in the Chinese resort island of Hainan following his planned summit with North Korean leader, Kim Jong Un, in late February.” It’s almost impossible to imagine Trump would travel all the way to Hainan without signing some kind of agreement.

But what kind? Former Reagan economic adviser Martin Feldstein, in a recent essay entitled “There is no Sino-American Trade War,” argues fixating on the trade balance only plays into China’s hands, making it easier for Beijing to buy its way out of concessions on issues that really matter: US access to China’s market and Chinese theft of American technology. “The basic economic fact,” Feldstein observes, is “that the overall US global trade imbalance is the result of economic conditions in the US – the excess of investment over savings. If the Chinese bought enough US goods to eliminate the bilateral imbalance, the US imbalance would merely shift to other countries, without reducing the overall imbalance.”

Later in the day, the White House released a statement listing seven negotiating points with China, including technology transfer, intellectual property, obstacles to American business in China, commercial cyber theft, subsidies for state-owned enterprises, obstacles for American trade to China and currency concerns. The statement stresses: “The purchase of United States products by China from our farmers, ranchers, manufacturers, and businesses is a critical part of the negotiations.”

More China news below.

Clay Chandler
@claychandler
clay.chandler@timeinc.com

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