Trump's Vow to Crack Down on China Set to Run Into Complex Reality
November 12, 2016
On the campaign trail, Donald Trump hurled threats at China, telling it to level the playing field on trade or accept the consequences. Now as president, confronting the world’s second-biggest economy will be a much taller task.
Trump accuses China of victimizing the U.S., a pitch that got him a big following with voters in traditionally blue-collar states who blame globalization for trade-related job losses. He has promised to label China a currency manipulator, bring trade complaints against the nation, and impose tariffs if it doesn’t halt what he sees as unfair trading practices.
“I expect him to come out of the chute criticizing China a bunch and demanding improvement in China trade policy,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies in Washington. "But he’s going to get briefed by his staff in the White House and come face to face with new data that don’t accord with his current view.”
On the accusation of China manipulating its currency, for example, Trump’s new Treasury secretary will have to explain why he’s shifting the U.S. stance after Barack Obama’s administration repeatedly found that the country doesn’t deserve that label.
The Chinese yuan has appreciated 16 percent against the dollar over the last decade. Rather than trying to weaken the yuan -- an advantage for an export-led economy -- China sold an estimated $570 billion in foreign-exchange assets from August 2015 to August 2016 to shore up the currency, the U.S. Treasury said in a report last month.
As president, Trump will have a range of levers to ratchet up trade pressure on China. Under the 1974 Trade Act, for example, he can impose unlimited tariffs and quotas on countries that the U.S. deems having unreasonable or discriminatory trade practices. He can also have his top trade official launch a complaint against China at the World Trade Organization, though past cases show it can take years to wind through that process.
Former U.S. Treasury Secretary Lawrence Summers on Thursday urged Trump to apply remedies within the existing trade laws to address “abuses” by foreign nations. “In the current environment, naming China a currency manipulator on day one is a ludicrous proposal,” Summers, who served in the Obama and Bill Clinton administrations, said in a Bloomberg TV interview.
With so much at stake, his administration will have to walk a fine line to ensure the world’s two most powerful economies don’t descend into a trade war.
“It’s basically impossible to imagine China not feeling a political need to retaliate -- maybe not symmetrically, but in some way,” said Rory MacFarquhar, a visiting fellow at the Peterson Institute for International Economics who worked on China affairs in Obama’s White House.
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