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 U.S. 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 U.S.-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 U.S. 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 U.S. 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 U.S. 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.
