Beijing’s economic sage looking to work miracle in Washington
The stakes are high for Liu He, as Trump leans toward action on his decades-old trade fight promise
China sent yet another high-level emissary to Washington this week, the third in a succession of officials dispatched to help avert a crisis in the world’s most important bilateral relationship. Coming just several weeks after Foreign Minister Yang Jiechi checked in with the Trump administration, the visit by President Xi Jinping’s top economic adviser, Liu He, that started on Tuesday will also focus on trade.
Yang’s visit was reportedly seen by people on both sides as unsuccessful, though China tried to put on a brave face during the trip. Beijing made a point of highlighting the resumption of a high-level economic dialogue pushed by Xi in his latest conversation with his US counterpart Donald Trump. The US administration has not confirmed their agreement to restart the talks that they indicated no interest in continuing late last year.
It has been reported that Liu is set to get a host of new titles that would make him the de facto architect of China’s economy, in effect bypassing the premiership. The Harvard-trained economist and old friend of Xi could be the most important economic policy figure since Zhu Rongji, who helped realize Deng Xiaoping’s vision of reform and opening-up in the 1990s.
There are few men on the planet for whom a US-China trade war would be more troubling than Liu, who second only to Xi now shoulders the burden of steering China to prosperity.
Liu received accolades for his promises of reforms that will “exceed the expectations of the international community” when he spoke at the Davos, Switzerland, World Economic Forum in January, but he didn’t specify what those would be. Is he bringing along specific promises? While China announced new policies to open up the financial industry further over the weekend, the Trump administration was reportedly unmoved by a previous announcement on that issue after the US president’s trip to Beijing last November.
Or will he be bringing threats? China has opened a series of its own investigations into US imports in recent weeks, some targeting the agricultural industry identified as key to Trump’s political base. Whatever cards Liu is going to play, he will be injecting himself into a debate within the administration that has been playing out for more than a year of the Trump presidency.
The fight between the so-called “globalists” and the “economic nationalists” within the White House has leaked out into the public at times, with numerous cabinet members reportedly pushing back against any harsh trade restrictions. Early on, the globalists, who include chief economic adviser Gary Cohn and Treasury Secretary Steven Mnuchin, were seen as winning this contest, holding Trump and his calls for tariffs at bay.
The debate rages on, but if reports are to be believed, Trump knows quite well where he stands. One official with knowledge of recent trade discussions told news website Axios that the White House was preparing to impose tariffs on a “shit ton” – potentially hundreds – of Chinese products, using Section 301 of the US Trade Act of 1974. Two sources said Trump is frustrated that the officials have been dragging their feet on announcing the tariffs.
Lost in much of the discussion of the Trump administration’s trade policy, and hesitance thus far to follow through on threats, is Donald Trump himself. Commentators are fixated on his lack of interest in and lack of consistent positions on policy details. Some go so far as to say his administration has no coherent policy at all as a result. There are indeed few issues that Trump has been consistent on throughout his political career, which began long before the 2016 campaign.
When Trump flirted with a presidential run in 2000, he released a book outlining his policy priorities, and his position on China, save a recent shift on his currency-manipulation claim, has not changed at all. On foreign policy, which Trump appears to have little interest in besides China, the world’s now-second-largest economy was identified as the top priority.
“Our biggest long-term challenge will be China,” the book bearing Trump’s name as author said. “The Chinese people still have few political rights to speak of. Chinese government leaders, though they concede little, desperately want us to invest in their country. Though we have the upper hand, we’re way too eager to please.
“We see them as a potential market and we curry favor with them at the expense of our national interests. Our China policy under presidents Clinton and Bush has been aimed at changing the Chinese regime by incentives both economic and political,” the book published 18 years ago went on. “The intention has been good, but it’s clear that the Chinese have been getting far too easy a ride.”
While economists, as well as cabinet members in Trump’s administration, warn against the consequences for American workers and consumers that a trade war would bring, the president said recently he is not worried.
“It’s possible you won’t be creating – you won’t be having much of a problem in terms of pricing because I actually think a lot of the countries will eat it because they want to continue to export,” Trump told lawmakers this month.
Add to that reports this week that not only does trade hawk US Trade Representative Robert Lighthizer have Trump’s ear, but the once-marginalized Peter Navarro has apparently risen from the dead. According to White House aides, Navarro, who has been described as “perhaps the most extreme advocate in Washington, and maybe in all of economics, for an aggressive stance toward China,” is being “strongly considered” to be named assistant to the president for trade policy.
Many have warned of the imminent deluge of tariffs and trade restrictions for more than a year now. It has never materialized. Some in the White House, it seems, will tell you that doesn’t mean it never will.