President Trump dispatched a team of top Cabinet officials to high-stakes trade talks in China with instructions to go to the mat to burst open what he says are the communist country’s barriers to American exports and investments.
In a key test of Mr. Trump’s campaign promises to address the gaping Chinese trade surplus with the U.S., Commerce Secretary Wilbur L. Ross Jr., a key member of the team, said Tuesday that the marching orders mean the U.S. must be willing to sustain some short-term economic hits and tempt a trade war if that’s what it takes to wring concessions from Beijing.
“If you don’t take some risks and you don’t show you are willing to absorb a little bit of pain, how on earth are you going to get things changed?” Mr. Ross said at the Milken Institute Global Conference in Los Angeles, where he made an appearance during a stopover en route to Beijing.
“If you just do nothing, we know how that turns out: more and more trade deficits,” he said. “That’s not acceptable to this administration.”
The talks, which will be led by Treasury Secretary Steven T. Mnuchin, stem from Mr. Trump’s aggressive moves on trade, including ordering tariffs on $150 billion worth of Chinese goods. The president said the tariffs fought what he called China’s unfair trade practices, its subsidies of key industries and companies, and the theft of U.S. intellectual property.
The trip also comes at a time of extraordinary ferment in U.S. trade and foreign policy. Mr. Trump is hoping for Chinese President Xi Jinping’s cooperation on North Korean nuclear talks, a postponed fight with Europe, Mexico and Canada over steel and aluminum tariffs, and a rush to negotiate a revised North American Free Trade Agreement with Canada and Mexico before all three nations head into turbulent elections this year.
The president’s negotiating team in China includes U.S. Ambassador to China Terry Branstad, U.S. Trade Representative Robert Lighthizer, White House trade adviser Peter Navarro and the president’s top economic adviser, Larry Kudlow. The talks are scheduled for Thursday and Friday in Beijing.
Warnings of dire consequences for Americans in a trade war — higher prices for everyday goods such as clothing and electronics, as well as job losses — have come from free trade proponents on both sides of the political divide, led in large part by conservatives.
“Tariffs on imported goods from China will mean higher costs for American families. And Chinese tariffs on American goods could potentially run American farmers out of China,” said Riley Walters, Asian trade and economic policy analyst at The Heritage Foundation.
He urged the administration to “focus on removing tariffs, including those that have been threatened, and reducing barriers to investment.”
Mr. Trump said his tough stance on trade was already working by bringing China to the negotiating table.
“Delegation heading to China to begin talks on the Massive Trade Deficit that has been created with our Country. Very much like North Korea, this should have been fixed years ago, not now. Same with other countries and NAFTA … but it will all get done. Great Potential for USA!” he tweeted.
Mr. Xi has said he is open to discussions on reducing barriers and opening markets, while positioning himself as a champion of open markets and the international trade regime overseen by the World Trade Organization in the face of American bluster.
Beijing officials have balked at Trump administration claims of intellectual property theft, and trade negotiators such as Chinese Commerce Minister Zhong Shan are expected to reject outright many of the Trump administration’s expected demands, including for a mandatory $100 billion reduction in America’s $375 billion annual trade deficit with China.
Still, China’s export-oriented economy has much to lose from a trade war with the globe’s largest economy and its largest importer.
Chinese Premier Li Keqiang said last week that he hoped the two countries would be able to manage and control their differences.
“There is no winner in trade conflict, which will not only affect the recovery of the world economy but also the global industrial chain,” he said. “It is also what the international community expects from our two countries.”
Heading into China trade talks, the administration announced a one-month delay in tariffs on steel and aluminum imports from Mexico, Canada and the European Union that were supposed to take effect Tuesday. Some analysts said the move was intended to avoid a trade battle on two fronts as the Trump team arrives in Beijing.
But the move did not mollify some trade officials in Europe, who complained that the U.S. keeps the threat of damaging tariffs hanging over their heads while disrupting global markets.
“The U.S. decision prolongs market uncertainty, which is already affecting business decisions,” the European Commission, the EU’s executive arm, said in a statement. “The EU should be fully and permanently exempted from these measures, as they cannot be justified on the grounds of national security.”
Willingness to deal
But the White House portrayed the delay as a sign that U.S. trade partners are finally showing a willingness to deal.
“We are extending those negotiations because we’ve seen some progress,” said White House press secretary Sarah Huckabee Sanders. “I’m not going to get ahead of what that may look like. But we have 30 days to continue in those negotiations, and hopeful that we can get something that works for everybody.”
The administration has been brokering deals with major importers since the March 1 announcement of a 25 percent tariff on steel and 10 percent tariff on aluminum.
Officials reached an agreement with South Korea on steel imports as part of a broader trade renegotiation, and agreements in principle were struck with Argentina, Australia and Brazil on steel and aluminum that soon will be finalized.
As it opens negotiations with China, the administration is also trying to wrap up a replacement for the 24-year-old NAFTA, which Mr. Trump has harshly criticized since he was a presidential candidate. The political calendar in all three countries is putting even more pressure on the negotiators.
“I believe if we don’t get it done in the next week or two, we’ll be on thin ice,” Mr. Lighthizer said Tuesday at the U.S. Chamber of Commerce’s China Business Council conference in Washington.
Mr. Trump has threatened to rip up the deal among Canada, Mexico and the U.S. if it can’t be fixed to his satisfaction, mainly stopping American manufacturers from relocating to low-wage Mexico and shipping goods back to the U.S.
If the negotiators reach a deal in two weeks, that would clear a path to sign an agreement before Mexico’s presidential election July 1. The outcome of the election could cancel whatever deal is close at hand.
Trade analysts don’t expect major agreements to be struck by this week’s delegation to China but say Mr. Trump can lay down some markers on what kinds of concessions Beijing will have to make to ease the U.S. pressure.
“The Trump trade negotiators certainly will not achieve major breakthroughs in this first foray,” wrote Claude Barfield, a onetime U.S. trade negotiator and now a resident scholar at the American Enterprise Institute. “But they can at least put on the table the major trade and investment obstacles that form the core of Beijing’s anti-competitive regime of state capitalism.”