Path: Sino-US >> Sino-US News>> Updates >>
Experts optimistic about China-US trade relations despite Trump’s trade threat against China

Photo: Shannon Stapleton/Reuters

The overall trade relations between China and the US will head in a better direction despite US President Donald Trump’s protectionanist threats against China, Chinese experts said.

“There might be confrontation over trade between the two countries in the beginning of a new administration, but it could be adjusted gradually because the two countries are highly reliant on each other fundamentally,” Zhou Mi, a senior research fellow of the Academy of Ministry of Commerce of China, told sino-us.com.

Zhou’s remarks came after Trump declared China the "grand champions" of currency manipulation in a recent interview with Reuters and said he has not "held back" in his assessment that China manipulates its yuan currency, despite not acting on a campaign promise to declare the country a currency manipulator on his first day in office.

Since his presidential campaign, Trump has repeatedly claimed to label China as a currency manipulator for the purposes of a competitive trade advantage.

But in fact, the Chinese government has been making efforts to prevent the yuan from further depreciation pressure by using its foreign reserves, which fell by $319.8 billion last year, and further fell by $12.3 billion in January 2017 to $2.998 trillion, according to the State Administration of Foreign Exchange (SAFE). Other measures have also been taken by China to ease the pressure of the yuan’s depreciation.

“The Chinese yuan is facing a depreciation pressure, and China has been making efforts to prevent the value of yuan from dropping instead of vice versa. By saying tough words on yuan’s exchange rate, Trump is only creating disputes over a trifle matter, and China does not have to take it too seriously,” said Mei Xinyu, a research fellow with the Ministry of Commerce.

The US trade deficit with China has been increasing between 1985 and 2015, except for a drastic drop during the financial crisis in 2009. Even between 2005 and 2008 when yuan appreciated against the dollar by nearly 20%, the trade deficit of US with China increased by nearly $65.8 billion during this period, according to data on the website of the United States Census Bureau.

“(It shows) that the Chinese yuan’s exchange rate should not be blamed for causing US trade deficit,” said Zhou.

China and the US have different industrial structures and factor endowments. As companies always want to lower their costs and maximize their profits, many foreign companies invest and produce products in China, and then export those products to America again. The huge trade deficit of US with China is an inevitable outcome of international industrial specialization, he added.

“I think one of the reasons why Trump has repeatedly claimed China as the currency manipulator is that he wants to show his people that he is different and he can do something that his predecessors have never done,” Zhou said, adding it could also be a bargain chip for Trump to negotiate with China.

According to the U.S. Treasury's regulations, three criteria are required before the U.S. could label a country “currency manipulator”: A significant bilateral trade surplus with the U.S. larger than $20 billion; a material current account surplus larger than 3 percent of gross domestic product; and persistent interventions to keep its currency weak.

And the U.S. Treasury Secretary Steven Mnuchin has said last week that the administration would stick to the existing process to judge whether China was a currency manipulator.

In the Treasury's most recent review in October last year, China met only one of the three criteria, which is a goods trade surplus of $347 billion in 2016, according to the U.S. Census Bureau. And that means China does not match the definition of currency manipulator under the rules set by the US Treasury.

Trump has also threatened to impose  tariffs as high as 45 percent on China's exports to the U.S. during his campaign, but Chinese experts say, it’s still too early to judge whether or not Trump will stick to his campaign vows, as such a policy may run into a roadblock: some of the American consumers may not be able to buy cheap products that some merchants import from China.

“It is a game between America’s import merchants of Chinese products and providers of the substitutions of those imports. Whether Trump will raise the tariff or not in the end depends on which party will win in lobbying the Congress,” Lin Caiyi, chief economist of Guotai Junan Securities, told sino-us.com. “It’s hard to say which party is stronger so far,” she added.

In a previous press conference on February 21, former minister of the Ministry of Commerce of China Gao Hucheng said that cooperation will be the only correct choice between China and the US, and trade war should not be an option. He also said that China will assess carefully any concrete plan (on the tariffs) worked out by the US, and will respond according to that assessment.

“There is no relationship without friction. China doesn’t have to care too much about whether or not Trump would finally make a concession on China’s currency or trade policy issue, because Trump knows how important China is for America,” Mei said.

During a meeting with Chinese State Councillor Yang Jiechi in Washington last week, US Secretary of State Rex Tillerson affirmed the importance of a “constructive” relationship between China and the US. He also said that the US is willing to work with China and to expand cooperation in various areas and deal with sensitive issues properly through consultation in order to better develop US-China relations, according to the statement.


Related Stories
Share this page
Touched Sympathetic Bored Angry Amused Sad Happy No comment