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As Trump hosts Xi, meet the new wild card on trade: The US

Associated Press logo Associated Press 5/04/2017 By PAUL WISEMAN, AP Economics Writer
FILE - In this Monday, Feb. 27, 2017, file photo, President Donald Trump meets with health insurance company CEOs, in the Roosevelt Room of the White House in Washington. As Trump prepares to host his Chinese counterpart, Xi Jinping, a reversal of sorts has emerged: It’s the U.S. leader who is now seen as an unpredictable wild card, skeptical of free-trade deals and their enforcement. And it’s China that’s cast itself as a champion of rules-based global trade. (AP Photo/Pablo Martinez Monsivais, File) © The Associated Press FILE - In this Monday, Feb. 27, 2017, file photo, President Donald Trump meets with health insurance company CEOs, in the Roosevelt Room of the White House in Washington. As Trump prepares to host his Chinese counterpart, Xi Jinping, a reversal of sorts has emerged: It’s the U.S. leader who is now seen as an unpredictable wild card, skeptical of free-trade deals and their enforcement. And it’s China that’s cast itself as a champion of rules-based global trade. (AP Photo/Pablo Martinez Monsivais, File)

WASHINGTON — For years, at leadership summits and global conferences, the United States pushed a reluctant China to open its markets and embrace free trade.

Now, as President Donald Trump prepares to host his Chinese counterpart, Xi Jinping, at Mar-a-Lago in Florida, a reversal of sorts has emerged: It's the U.S. leader who is seen as an unpredictable wild card and a skeptic of free-trade deals — And it's China that is casting itself as a champion of rules-based global trade.

At the heart of the shift is an unconventional president who is overturning expectations of what the United States wants, what it says and how it behaves on a global stage.

At an annual gathering of global elites this year in Davos, Switzerland, Xi gave a speech extolling free trade. And when the United States abandoned an Asia-Pacific free-trade pact in January, China intensified efforts to persuade countries to join its version of a regional trade accord.

Trump, by contrast, has rejected any notion that free trade can work unless he adopts a more combative stance than his predecessors in the White House did. On Twitter last week, Trump predicted that the meetings Thursday and Friday could be "very difficult." And he warned that America's vast trade deficit in goods with China — $347 billion last year, nearly half the total U.S. trade gap in goods — was unacceptable.

"President Trump campaigned on addressing trade deficits and unfair Chinese trade practices, and China is clearly in his sights," says Myron Brilliant, head of international affairs the U.S. Chamber of Commerce.

On the campaign trail, Trump threatened to impose a 45 percent tariff on Chinese imports as punishment for what he called abusive trade practices. China hinted that it would retaliate by restricting sales of U.S. goods.

How the U.S. and China settle their differences over trade will have global repercussions. A trade war between the world's two biggest economies — together they account for nearly 40 percent of the world's economic output — could damage commerce and slow growth.

Most analysts aren't expecting fireworks — or breakthroughs — from the Mar-a-Lago summit, Trump's warnings notwithstanding. Trump's "tweet is trying to set low expectations," says David Dollar, a former official with the U.S. Treasury Department and the World Bank and now senior fellow at the Brookings Institution. "I don't think there's any chance of a big breakthrough."

"This is mainly a chemistry meeting," says Nathan Sheets, a Treasury official in the Obama administration and now a visiting fellow at the Peterson Institute for International Economics.

Trump and Xi will try to "get a sense of who the other is and an opportunity to assess whether or and to what extent there will be scope to work together," Sheets says.

One obstacle to any meaningful achievement in Mar-a-Lago: Trump's nominee to be the nation's top trade negotiator, Robert Lighthizer, has yet to be confirmed by the Senate, and other key slots remain vacant.

"The trade team for the new administration is not completely in place," says Dean Pinkert, a former member of the U.S. International Trade Commission and now a partner with the law firm Hughes Hubbard & Reed.

Rhetoric aside, neither Trump, with his saber-rattling, nor Xi, with his cheerleading on globalization, has yet matched talk with action.

As a candidate, Trump pledged to brand China a currency manipulator on his first day in the White House. He didn't. Instead, the new president bowed to the prolonged process by which the Treasury Department decides whether any countries deserve to be publicly shamed for deliberately undervaluing their currencies to gain an unfair trade advantage.

And in an interview with the Financial Times newspaper, Trump said he wouldn't threaten Xi with tariffs at their first meeting: "I don't want to talk about tariffs yet; perhaps the next time we meet."

"We have had a lot of wild talk on trade" from Trump, says Derek Scissors, resident scholar at the American Enterprise Institute. "We haven't had action toward China or anyone else."

Likewise, China's bold rhetoric on its enthusiasm for free trade so far appears largely hollow.

"The problem with that image is it's not consistent with the facts," Brilliant at the U.S. Chamber says. "It's becoming harder (for foreign companies) to do business in China. There's more regulation. There are more efforts to prop up domestic enterprises ... Xi's public diplomacy is not matched by China's reform efforts."

Beijing often demands that foreign companies provide it with technology as a price for access to the coveted Chinese market. It also protects key industries, especially involving such services as telecommunications and finance, where state-owned firms dominate.

"They simply won't share the market with foreigners — or in some cases even with private Chinese firms," Scissors says.

Some analysts say Xi might make some friendly gestures at Mar-a-Lago. He could, for example, promise to give foreign companies more access to an individual Chinese industry. Or announce plans to buy more Boeing airliners. Or offer to help finance Trump's ambitious plans to build roads, bridges and other infrastructure across the United States.

But for the most part, says Eric Shimp, a former U.S. diplomat who is a policy adviser with the Alston & Bird law firm, the meeting will likely act "as a genial icebreaker in which both leaders decide, 'OK, we're going to establish some sort of personal rapport first and deal with the tough issues later.' "

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