Tackling conflicts on the sidelines of G20 is now a daunting task for the two presidents after North Korea\u2019s successful launch of an ICBM<\/b>
\nUS President Donald Trump and his Chinese counterpart, Xi Jinping, have several trade- and investment-related conflicts to address in their second face-to-face meeting at G20 in Germany, a job made more daunting now that they\u2019 re caught up in a barrage of militaristic threats tied to North Korea\u2019s recent test of an intercontinental ballistic missile.
Trump was ready for a more aggressive stance even before the latest provocation from Pyongyang. Indeed, trade with China had been simmering much longer as a political issue in the US and accusations that Beijing\u2019s trade and investment policies have gutted employment in the US helped to buoy Trump\u2019s winning presidential campaign.
The Trump administration\u2019s strategy of \u201cbeing very nice and seeking to have the most positive personal relationship as possible\u201d has ended, Arthur Waldron, an original member of the US-China Economic and Security Review Commission, said in an interview with the South China Morning Post .
That commission\u2019s most recent report to the Committee on Foreign Investment in the United States (CFIUS) recommended tighter restrictions on state-owned Chinese companies looking to buy US technology, potentially blocking Chinese companies from US assets they\u2019 re most inclined to acquire.
US Senate Majority Whip John Cornyn and Senate Minority Leader Chuck Schumer are writing legislation to strengthen the authority of CFIUS, a body led by the US Treasury, which can recommend the president block foreign deals on national security grounds.
Xi, Trump agree on trade, military talks but appear at odds over North Korea
In December, before Trump took power, then-US President Barack Obama blocked a Chinese investor\u2019s proposed acquisition of the US unit of Aixtron SE, a German maker of semiconductor manufacturing equipment, in response to a CFIUS recommendation.
Tightening CFIUS addresses two issues that cut across party lines in the US: national security and reciprocity, the latter being the argument that if certain sectors are open to Chinese investment in the US, then those same sectors should be open to American investment in China. Beijing all but bans foreign companies from owning Chinese telecommunications, media, and many high-tech companies.
\u201cReciprocity is a major issue with regard to market access between the US and China, \u201d said Joel Backaler, a managing director at Frontier Strategy Group and author of China Goes West, a book about Chinese companies going global.
\u201cBoth sides have their reasons for protecting key industries, especially Chinese acquisitions of American high-tech firms in fast-growing areas like robotics, artificial intelligence and autonomous vehicles.\u201d
US Treasury Secretary Steven Mnuchin said publicly that Congress should pass legislation to make \u201ctechnical changes\u201d to the CFIUS statute.
Trump minds his manners for a smiling Xi at Florida retreat
Whereas Trump toned down his Beijing bashing ahead of the two leaders\u2019 first meeting in April, when he and Xi strolled through the grounds of the US president\u2019s Mar-a-Lago resort, he dialled up the rancour just days before the two will meet on the sidelines of the G20 Summit in Germany.
\u201cBecause the administration was new in office and President Trump did not have a fully formed view of the world, it is quite possible that early signals which it gave would not in fact be sustained, \u201d James Zimmerman, chairman of the American Chamber of Commerce in China, said in an interview.
\u201cThere may be a sense of satisfaction and success in China [in dealing with Trump] , but we may see some tough times ahead unless China can make changes.\u201d
Trump already had a pretext to take a tougher line with Beijing on trade and investment, even without North Korea\u2019s latest military provocation.
China\u2019s trade surplus with the US was pegged at US$107 billion in the first four months of 2017, according to US Census Bureau data. That puts the surplus on course for a full-year 2017 imbalance on par with the US$347 billion recorded in 2016, which Trump used to back up his anti-China rhetoric before taking office in January.
\u201cRumours continue to percolate that Trump is preparing for more aggressive trade action, \u201d Arthur Kroeber, founding partner and managing director at Gavekal Dragonomics, said in a recent report.
\u201cThe basic deal Trump thought he offered Xi at the Mar-a-Lago summit \u2013 a light touch on trade in exchange for more cooperation on North Korea \u2013 was absurdly unrealistic, given China\u2019s obvious unwillingness to change its North Korea policy.\u201d
With reports due from the US Commerce Department on steel and aluminium trade and calls for more scrutiny of Chinese investments in the domestic tech sector, Trump has another card to play in Germany.
Beijing, US reach trade deal to boost American imports to China in wake of Xi-Trump summit
Trump will be more inclined to negotiate with sticks instead of carrots when he meets Xi again because he\u2019s lost the \u201cillusion\u201d many US officials have that showing good faith and accommodation will prompt China to do the same, said Waldron, who is a University of Pennsylvania professor of international relations. \u201cIn China, [accommodation] is seen as a sign of weakness.\u201d
Trump may not have much to lose by taking a more aggressive stance in Germany because the extent to which Chinese investment supports the US economy doesn\u2019 t live up to the hype around China\u2019s appetite for US investments.
\u201cThere is surprisingly little direct investment between the United States and China \u2013 surprising given that these are the two largest economies in the world and the two largest worldwide recipients of foreign direct investment, \u201d said David Dollar, a senior fellow at the Washington-based Brookings Institution.
Only about eight per cent of the stock of China\u2019s foreign investments are in the US, while China represents \u201clittle more than one per cent\u201d of US investments abroad, Dollar said.
As for the reports on steel and aluminium, US Commerce Secretary Wilbur Ross was expected to issue a report on steel dumping last week, followed by a similar one on aluminium trade. China struggles with an overcapacity in both commodities because of the government\u2019s drive to keep large state-owned enterprises running, making these companies subject to anti-dumping investigations.
Trump, who\u2019s expected to take punitive action against the sources of dumped steel once the reports are out, might be keeping the reports \u201cin his back pocket\u201d as a bargaining chip with Xi, Waldron said.
The Trump administration appears confident that it would have international backing for such action.
\u201cThere has been consensus among our G7 allies that there is overcapacity and there\u2019s dumping in steel, \u201d Trump\u2019s National Economic Council Director Gary Cohn told reporters in Washington this week. \u201cI think there\u2019s uniform consensus among all of our G7 allies that we do need to deal with the steel problem specifically.\u201d<\/p>\n

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