US should match Trump’s friendlier tone with deeds

Tweeting about his country’s trade spat with China, US President Donald Trump softened his tone on Sunday, claiming that “taxes will become reciprocal and a deal will be made on intellectual property”, forecasting a “great future for both countries”. While China will hope he is doing more than just reading the tea leaves and that his conciliatory tone is in earnest, it will be aware that few are able to honor a friend who has prospered without envy and without wishing them at least some small misfortune.

And since the ongoing trade frictions between the world’s two largest economies have been triggered by the Trump administration’s obsession with the United States’ trade deficit with China, which it seems to regard as a barometer of China’s competitive economic prowess, and that the US’ shortfall remains colossal, it is hard to place too much faith in Trump’s fortune-reading skills and his prediction that everything is going to be hunky-dory unless he starts matching his words with actions.

The tit-for-tat threats of tariffs have been promises of a similar blow in exchange for a blow, and any kind of deal will require the US to give if it wants to take.

While statistical errors and US companies operating in China account for a large part of the deficit, the US’ one-sided trade policies are also responsible for the huge bilateral trade gap.

For example, the US has long imposed a strict restriction on normal high-tech exports to China to prevent the latter from challenging it as a technological powerhouse. If it relaxed its restrictions on high-tech exports to China, that would soon significantly reduce the deficit.

To be “reciprocal”, the US should also give national treatment to Chinese companies investing in the US. Currently, it commonly resorts to national security excuses to block Chinese companies’ investment in the US, a stance that is in stark contrast with China’s welcoming stance toward foreign companies, including US ones.

It should also recognize China’s progress in building a market economy, for by refusing to respect its market economy status, the US can conveniently adopt the surrogate approach when waging anti-dumping investigations against Chinese companies.

If his administration refuses to make any progress on those, it’s hard to see how Trump’s auspicious words can be given substance.

And China will take its cue not from words but deeds.