US-China relations: Mar-a-Lago Diplomacy

 

Next week, on Thursday and Friday, President Donald Trump will host Chinese President Xi Jinping at his Mar-a-Lago resort. This is not the first-time Mar-a-Lago has been at the forefront of the news cycle as President Trump often retreats to the Florida resort on the weekends to escape the capitol. One of the main conversation topics of this meeting will be the implementation of trade tariffs which the President has threatened throughout his campaign as well as into his first 100 days. The proposed 45% tariff would be an enormous increase from the existing 3% tariff levied on Chinese imports to the US, and would assuredly have a large impact on Chinese exports. China will look to dissuade President Trump from this tariff increase and they plan on doing so through President Trumps son-in-law, Jared Kushner. The Chinese government will try and take advantage of Trump’s convincibility by leveraging one his senior advisors.

When commenting on the GDP effects that this would have, Gene Ma, economist for China at the Institute of International Finance stated that the “direct impact on GDP would be sizable. The value added by export[s] is about 10 percent of China GDP, and [the] U.S. accounts for about one-fifth of China exports.” Because of the global aspect of the United States economy, these threats from President Trump would not only have an adverse effect on Chinese production but also on American production as well. Multinational companies such as Walmart outsource much of their production to China. They will have to pay more to import these goods back to the states and this tariff would cause their prices to spike. Because of this, American consumers would suffer and consumer demand would presumably decrease. According to CNBC, “China exported about $482 billion in goods to the United States in 2015, more than any other country”. The average American would be unable to shoulder the burden of this massive tariff, even if companies were to partially internalize the cost. Given the implications of the proposed tariff, many are looking to see how the markets respond leading up to, and in response to, the upcoming meeting.

In addition to the talks on trade, there are other issues that will be at the forefront of the conversation between Presidents Trump and Xi. Included will be the South China Sea, where China has claimed the territory as its own from other countries in the region, specifically the Philippines and there have been murmurs of potential military action. The South China sea is valuable for several reasons, including rich mineral deposits and favorable shipping lanes. It will be interesting to see how the meetings later this week play out, as well as how China-US relations change under the Trump administration.

Sources:

http://www.sandiegouniontribune.com/military/sd-me-ship-deployments-20170331-story.html

http://www.cnbc.com/2016/12/07/trump-and-china-tariff-on-imports-would-hurt-many-us-companies.html

http://www.cnbc.com/2017/03/31/trumps-mar-a-lago-diplomacy-with-chinas-xi-may-reveal-more-than-you-think.html

https://www.bloomberg.com/politics/articles/2017-01-18/why-trump-s-tariff-threats-get-taken-so-seriously-quicktake-q-a

https://www.nytimes.com/2017/04/02/us/politics/trump-china-jared-kushner.html

http://forward.com/fast-forward/367867/is-jared-kushner-the-surest-path-to-trumps-ear-china-thinks-so/

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17 Responses to US-China relations: Mar-a-Lago Diplomacy

  1. Alden Schade says:

    Though exports to the US and a tariff increase are non-trivial matters, I think the most important section of this post is that on the South China Sea. Military activity in this region has been ramping up for several years now, and China is unwilling to budge on its ownership of an “island chain” that it has literally built with sand and rock dredged up from the ocean floor. This issue is particularly concerning because it involves the US and longtime allies like Japan, who may be forced to act should China continue with its aggressive tactics.

    • choia18 says:

      Another point of issue is the United States trying to install a missile system in South Korea. This, as a result, has caused the Chinese to begin boycotting and discriminating against South Koreans and South Korean stores/goods in China. I personally believe this missile system will greatly benefit the nation, especially with the recent impeachment and arrest of Park Guen-Hye, the ex-president. China wants to keep the United States out of Asia but the other nations don’t want China bullying them throughout the region.

  2. Charlie says:

    While it is always good to see diplomacy in action, there is too much ground to be covered in just one meeting between these two leaders. China and the US have a lot to discuss even beyond the two already enormous topics of trade and the South China Sea.

    Trump and Xi are both busy men, but the events of the past year have brought the relationship between China and the US to the forefront. This ought to be the impetus for further dialogue between the two powers as China’s prominence o the global stage continues to grow.

    • zhengm18 says:

      From SA this morning: Tough talks between Trump and China’s Xi Jinping will begin today as the two discuss thorny issues like trade, foreign policy, security and the world economy. “We had a long discussion already,” Trump said last night. “So far, I have gotten nothing. But we have developed a friendship. I think, long term, we are going to have a very, very great relationship and I look very much forward to it.”

  3. sackettm18 says:

    I’ve always wondered if Trump is a man capable of deferring his strongly held beliefs about trade in the face of economic reality. Trump has an economics degree from Wharton, which makes his insanely reckless trade proposals even more confusing. He talks like he is so hell-bent on hurting China that he doesn’t care what the domestic impact of high-tariffs would inevitably be. Let’s hope the negotiations are based on sound reality versus ideology. A good compromise between the two might look like China reducing South China Sea activity in exchange for less trade manipulation talk.

    • feldsteinp18 says:

      I would like to think that Trump made these outlandish claims to cater to his voter base who wouldn’t necessarily understand macro economic theory. I am beginning to suspect that this isn’t the case. Despite this, I have a hard time believing that his cabinet and network of senior advisors will allow this to happen, given the disastrously negative implications of an action such as raising tariffs that high.

      • zhengm18 says:

        Yeah, it just economically does not make sense. If economic power is the new metric for a country’s strength now, why would Trump want to hurt this by imposing these tariffs? It really does not make sense.

  4. gristt18 says:

    As Charlie noted, this meeting will likely not carry much significance, since there are so many issues to cover. Since Trump’s rhetoric against the Chinese has been so visceral, it will be interesting to see what, if anything, comes from this meeting. My guess is that we won’t see any change from either side. You mention Jared Kushner in your post. His role in the Trump Administration’s dealing with China will be interesting to follow, as many believe that Kushner’s role is even larger than Secretary of State Rex Tillerson’s.

    https://www.nytimes.com/2017/04/02/us/politics/trump-china-jared-kushner.html?_r=0

    • feldsteinp18 says:

      I think that Trump, in the face of all of the negative PR he has gotten since being sworn in, will try and produce a “win” at this meeting. Something he can present to the press before the weekend news cycle to try and bump up his approval and popularity (which are at historic lows). I am skeptical though whether he will be able to, it will be interesting to see if this meeting will produce anything of substance or will simply serve as the beginning of an ongoing dialogue between the two Presidents.

      • hendersonn17 says:

        I agree with your comment about Trump trying to produce a “win” at this meeting, but I would be thoroughly surprised if anything of substance actually comes from it. The Chinese are very set in their ways, and so is Trump. While Trump may try to threaten the China with a trade war, military action, etc., I think that the two will leave these contentious issues off the table since the last thing Trump wants to do right now is stir up more controversy.

  5. bonesc18 says:

    This seems like campaign rhetoric in action…or at least an attempt at making it appear like President Trump is following through on one of his favorite stump speech topics. One of Trump’s biggest applause lines over the course of the 2016 campaign, was his desire to crack down on what he saw as unfair trading practices, particularly from the Chinese government. This plays well with those working class voters that went for Trump by big margins because of a loss of manufacturing jobs. Imposing tariffs on Chinese goods would seem to be the manifestation of this promise. However, as you’ve suggested, tariffs have real and immediate economic consequences that impact the very same voter. It’s a careful line to walk.

    • feldsteinp18 says:

      While I agree with you I think that Trump stating that this will happen and it actually happening are two distinctly different things. I would not be surprised if once this meeting comes and goes, the Chinese import tariff is not touched.

  6. choia18 says:

    Perhaps the United States could look to other sources for importing goods, but again that would not be feasible since so many companies have outsourced to China. All that can happen is increased prices for the average consumer. What’s worrying to me is what if China simply focuses more trade attention to Europe or Africa? Could China simply compensate what they might potentially lose out on if they reduced their trade to the United States? This also does not seem like a feasible action for China to take but if the Trump administration is unwilling to work with China, I would not put this choice out of the question.

    • sackettm18 says:

      This is an example of economic mutual assured destruction (kind of). No one wins in this scenario. Like I said earlier, let’s hope that bright educated economics-wary minds win over rhetoric.

  7. masonw17 says:

    Last semester in International Finance, Prof. Davies repeatedly mentioned that there are no possible positive economic outcomes of this sort of tariff war. Again, however, it is perhaps worth questioning the role which political position plays in this decision: Pres. Trump really wants to return the US to being the sole global superpower and may see economic loss as worthwhile in comparison to political dominance.

  8. Christopher Tyler says:

    Aside from tariffs and the south China sea, other issues may arise concerning the recent attack in Syria. Although there has been relatively positive attitudes toward Trump’s decision, China and Russia may see this action as a plot to enhance the US’s role in the world. Though Trump has yet to definitively make any deals regarding China thus far, Xi may be hesitant to reach any middle ground with Trump after his recent foreign policy act.

  9. Matthew Kaminer says:

    It is interesting how Trump’s meeting with Jinping at Mar-A-Lago has spurred up much media interest into the Chinese attitude towards golf. although at least a million Chinese play golf, numerous publications have noted the CCP’s contempt towards the sport as a game for rich people only. But this inclination dates back to 1949, when Mao Zedong called golf the “sport for millionaires.”

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