US businesses worried Trump’s deals with China are ‘amateurish, illogical horse trading’
The 100-day trade talks announced after a Sino-American presidential summit last week will aim to deal with decades of thorny trade issues, leaving some U.S. business leaders wary that the short timeline might yield superficial results.
Business executives are also worried that President Donald Trump’s focus on curtailing North Korea’s nuclear and missile programs could undercut U.S. commercial interests in China.
Days after Trump’s meeting with President Xi Jinping, Trump tweeted that Beijing would get a better trade deal with Washington if it helped resolve the U.S. problem with Pyongyang.
The U.S. business community should not be used as a “bargaining chip”, said James Zimmerman, a Beijing-based lawyer and the former chairman of the American Chamber of Commerce in China.
“Trump’s ‘far better trade deal’ linkage to North Korea is amateurish, illogical horse trading, at best,” Zimmerman said.
The White House has said U.S and Chinese officials are still at the early stages of “fleshing out” a pledge by Trump and Xi to develop the 100-day plan to reduce the U.S. trade deficit with China, which last year reached $347 billion.
It was among the limited set of public outcomes from their first meeting in Florida.
While Trump has promised to aggressively address trade imbalances and open the Chinese market to more American goods and services, William Zarit, the Chamber’s current chairman, said the talks need to address the “structural impediments” U.S. companies face in China.
“We’d rather be talking than having a trade war. But remember we’ve been talking for 20 years and haven’t gotten very far,” Zarit said.
The White House has said that issues including opening up China’s financial services sector and getting U.S. beef exports into China were up for talks.
“We are pleased to hear the issue has been elevated to the highest levels of both governments and that there is commitment to resolve the U.S. beef access issue in an expedited fashion,” CEO of the U.S. Meat Export Federation Philip Seng said.
Others remain skeptical.
“Beef should have been done 10 years ago. The fact that that has been going on for so long is emblematic of the imbalance in the way we negotiate and deal with each other,” said James McGregor, Chairman of APCO Worldwide in Greater China.
China has purchased hardly any American beef since it conditionally lifted an import ban last year that was imposed in 2003 due to a case of mad cow disease in Washington state.
Despite initial media reports suggesting Xi may have offered access for U.S. beef as a concession to stave off rising trade tensions, China’s Premier Li Keqiang this week appeared to link progress on the issue to U.S. restrictions on imports of some Chinese poultry products for food safety reasons.
“China is willing to import market-competitive U.S. beef that meets quality and health standards,” Li told a U.S. Congressional delegation in Beijing on Monday, according to the state-run Beijing News.
“Chinese chicken is also very competitive in the international market. We hope the United States can quickly lift the ban on Chinese chicken imports. Only in this way can we better embody fair trade,” Li said.
While individual companies are hesitant to criticize China for fear of backlash, critics from U.S. business groups accuse Beijing of unfairly subsidizing domestic firms and restricting foreign investment into much of the world’s second-biggest economy.
A 50-percent ownership cap for foreign life insurers, for example, despite China’s 2001 World Trade Organization commitments to lift it, has helped limit their market share to about 6 percent.
Beijing has repeatedly promised to open up financial services more widely to foreign firms, but has given few details on implementation.
Jacob Parker, vice president of China operations at the U.S.-China Business Council, said concerns persist that China would make commitments but not follow through or take only incremental steps.
While the government could remove some industries from a list of sectors restricted for foreign investment, businesses could still face red tape and licensing hurdles or be restricted to regional pilot zones.
“There are lots of ways China can call something an opening and it is not,” Parker said.
Xi proposed further cooperation on infrastructure development in meetings with Trump, but Chinese state-owned companies working on major U.S. public works is a politically fraught issue in the United States, where Trump campaigned on creating jobs.
High-tech industries where China hopes to funnel investment, such as semiconductors, virtual reality and autonomous vehicles, are considered sensitive. Such partnerships would likely also have to clear national security hurdles.
Skeptics also wonder if Chinese cooperation in redressing the trade imbalance will be limited to areas that serve Chinese needs, such as increasing imports of U.S. gas, oil and coking coal.
Xi stopped in Alaska on his way home, meeting with Governor Bill Walker, who touted the state’s oil, gas, and mineral resources.
On the market access side, lowering restrictions on foreign investment in Chinese banking, securities, investment management, futures, insurance, credit ratings and accounting sectors, as Beijing has already promised, would help China improve the quality financial of instruments and make their markets more stable and professional, said McGregor.
“If you look at the things that China is talking about opening, it’s all areas where China needs help,” McGregor said. Visit Business Insider to read more
As More and More Red Flags Go Up, Is Wall Street About to Start a Slide?
Markets have been raising some red flags this week that analysts say could result in increased volatility and possibly a stock market pullback in the near term.
Driven by worries about North Korea, Syria, and the French election, investors have been loading up on safe haven plays and lightening up on risk.
One of the big concerns of the week has been the fact that a North Korean missile launch is speculated to come this weekend to commemorate its Day of the Sun, a holiday honoring the birth of its founder, Kim Il Sung. The launch was expected to be in the middle of a three-day Easter holiday weekend, and traders have been hedging ahead of it. Adding to the nervousness, the U.S. dropped the largest ever non-nuclear bomb in Afghanistan during market hours Thursday, and U.S. officials are planning a possible pre-emptive strike.
The stock market is still up sharply, with the S&P 500 having risen more than 9 percent since Election Day. But both the S&P 500 and the Dow Jones closed below their 50-day moving averages (the average of the last 50 days of closing prices) on Wednesday, a technical threshold they last closed under right around Election Day.
Unpredictability Feeds Volatility
“The unpredictability of geopolitics is making it so hard. It’s causing people to say maybe I’ll shoot first and ask questions later,” said Sam Stovall, chief investment strategist at CFRA.
“I think depending on the severity of it, we have a pullback or a correction but because of the economic indicators I’m looking at, I’m not worried a recession is around the corner, and as a result, I don’t think we’re heading for a bear market,” Stovall said.
Aaron Kohli, rate strategist at BMO, said the market is definitely trading on fears about North Korea and other geopolitical events, but the big change in market attitude was in March, when Republicans failed to pass a new health-care bill. That legislation was seen as a necessary step ahead of tax reform, and markets now see both as in limbo.
“It’s been about reading the tea leaves of the health-care failure, and it’s been slowly taking back some of the inflation and growth expectations,” said Kohli. “It’s been the crescendo with these [geopolitical] headlines, or tape bombs.”
Stronger Dollar, Weaker Dollar
Worries about North Korea and Syria come at the same time global investors are already on edge about the potential for the National Front candidate Marine Le Pen to win the French presidential election. While not expected, a victory by Le Pen could lead to France leaving the euro zone. The first round vote is April 23, and the second round is May 7.
The fact that geopolitical tensions have been running high has clearly filtered through to markets. Stocks cut some losses towards the end of the week, and the dollar strengthened after Russia and the U.S. showed a willingness to work on their relationship and some thorny issues like Syria and North Korea.
Shortly after Secretary of State Rex Tillerson held a news briefing with his Russian counterpart on Wednesday, President Donald Trump told the Wall Street Journal he believes the dollar was too strong and that he likes low interest rates. That sent the greenback reeling, and it remained under pressure for the rest of the week.