Donald Trump’s honeymoon with China ends as dialogue turns frosty


The brief honeymoon between the world’s two largest economies appears to be over.

Three months ago, President Donald Trump had warm words for his Chinese counterpart Xi Jinping after the two leaders bonded at Trump’s Mar-a-Lago resort in Florida. Within weeks, the Trump administration was touting early wins in talks with China, including more access for US beef and financial services as well as help in trying to rein in North Korea.

Now, the two sides can barely agree how to describe their disagreements.

High-level economic talks in Washington broke up Wednesday with the two superpowers unable to produce a joint statement. Commerce Secretary Wilbur Ross scolded China over its trade imbalance with the U.S. in his opening remarks, and then both sides canceled a planned closing news conference.

Both sides later made separate statements following the talks. Treasury Secretary Steven Mnuchin and Ross said China “acknowledged our shared objective to reduce the trade deficit which both sides will work cooperatively to achieve.” China’s foreign ministry issued a reciprocal statement, saying both sides agree to start “constructive cooperation” to narrow the trade gap.

Trump campaigned on “protecting the forgotten man and putting America first, but if you can’t deliver their jobs back to them, the next best thing is to get them some retribution and that’s what’s happening here,” said Stephen Myrow, managing partner at research firm Beacon Policy Advisors LLC in Washington.

It was the first meeting under the Trump administration of the two countries’ most senior economic officials, a ritual that began in 2008. Rebranded as the Comprehensive Economic Dialogue this year, the discussions were led by Mnuchin and Ross on the American side, and Vice Premier Wang Yang for the Chinese. Federal Reserve Chair Janet Yellen took part in the talks, and executives including Alibaba’s Jack Ma and Blackstone’s Stephen Schwarzman met on the sidelines.

Trade Irritants

After last year’s forum, the two countries released a 6,589-word statement asserting the mutual interest they share in each other’s prosperity. The document also included commitments, such as one by China to reduce excess capacity in its steel industry — still a major irritant as the Trump administration weighs whether to impose tariffs and quotas on steel imports.

“The Trump administration may have had unrealistic expectations of what China will do to balance trade,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong. “Now it is the start of real hard negotiations.”

At opening remarks by the two sides on Wednesday, Ross complained about the trade gap with China in unusually blunt terms. While U.S. exports to China have grown in recent years, imports from the Asian country have expanded even faster, leading to a $309 billion trade deficit, Ross said.

“If this were just the natural product of free-market forces, we could understand it, but it’s not,” Ross said, as Wang looked on. “So it’s time to rebalance in our trade and investment relationship in a more fair, equitable and reciprocal manner.”

In his opening remarks, Wang called cooperation “a realistic choice” for both countries, while adding his own view of how the US-China relationship should proceed.

“Dialogue cannot immediately address all differences, but confrontation will immediately damage the interests of both,” Wang said, according to the state-run Xinhua News Agency.

Canceled Briefings

Shortly after, the Treasury sent an email to reporters saying the US had canceled a news conference scheduled at the end of the day, when Mnuchin and Ross were to discuss the outcome of the meeting, which they expected to be concrete Chinese commitments. The Treasury department later emailed a notice that China had canceled its own media briefing.

While confronting the Chinese over the US trade deficit will play well politically in America, it’s not a good strategy for making progress with Chinese leaders, who are under their own political pressures at home, said David Loevinger, managing director of emerging markets sovereign research at TCW Group Inc.

The US has had success by allying with economic reformers who will push back against “powerful vested interests” in China opposed to opening up its economy, said Loevinger, who played a leading role in economic talks with the Chinese as Treasury’s senior coordinator for China affairs in the Obama administration.

“In some ways the Teddy Roosevelt strategy of talking softly and carrying a big stick is effective with China, but in the administration’s case, they’re tweeting loudly with very little follow-up,” he said.


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