Week Ahead Long game with China
The leaders of the globe’s two largest economies will meet in the week ahead in the gilded rooms of Mar-a-Lago, an estate that evokes a time of American economic ascendance.
President Donald Trump will host Chinese President Xi Jinping for a day and a half of highstakes international diplomacy and economic gamesmanship.
As a candidate, Trump threatened to slap a 45 percent tariff on Chinese imports. While that may still be Trump’s opening offer, the vows China has since made to respond with tariffs of its own might change that part of the conversation.
China is the biggest market for American exports from 33 states. China is the second-largest holder of American government debt. Meantime, America is the second-largest buyer of Chinese-made goods.
In other words, there are deep economic ties between the two countries that run well beyond the walls of a seaside private club.
After taking office, Trump pulled out of the Trans-Pacific Partnership trade deal. Just last week, he canceled Obama-era climate policies. Both actions bring with them the potential of China filling the void American has left behind.
China is not a party to the TPP, but America’s absence from the deal could provide China with an opening for corralling its Asian neighbors into its own trade deals. Similarly, should China decide to move forward with its pledge to cut greenhouse gas emissions while the U.S. doesn’t, it—not America—could become the de facto home of clean energy innovation.
These are just a few of
the macroeconomic stakes involved in the coming week’s talks.
Both countries hold sway, something long-term investors must recognize.
China is Boeing’s biggest market. Chinese-made Apple iPhones have translated into billions in profits for the California company’s shareholders. Meantime, Netflix and Google have left China over the government’s control of the internet and favoritism for Chinese firms. Facebook and Twitter are blocked in China.
An evenhanded, diplomatic, dare I say presidential performance will reassure investors mutually destructive economic policies will not distinguish U.S.-China relations.