When President Trump goes to China, China’s strategy will be to roll out the red carpet for President Trump and to show him great respect, while offering little or nothing in the trade arena.
China’s strategy will be to roll out the red carpet for President Trump and to show him great respect, while offering little or nothing in the trade arena. Economists generally do not care about bilateral imbalances, but Trump has made a big deal of the U. S. bilateral deficit with China. The deficit has grown 6 percent this year and will continue to rise, especially if there is a tax cut. The real issue for U. S.-China is not the bilateral imbalance but rather China’s market access restrictions. Important products such as autos face a 25 percent import tariff. More important are the investment restrictions in a wide range of manufacturing and services industries. In services in particular, it is difficult for U. S. firms to sell into the China market if they cannot invest there. Firms are limited by restrictions in finance, telecom, logistics, entertainment, and social media.
The state visit to China comes at an inopportune time, too soon after the 19th Party Congress for China to have any significant opening moves in the works. President Xi will tell Trump that China is planning to open up more sectors, but there are unlikely to be any details or commitments.
