Trump should open market more to Chinese companies: expert

Updated 2017-04-07 10:01:10 Global Times

Experts said U.S. President Donald Trump should not address the U.S. trade deficit and job issues by hurting its trading partners, after the Asian Development Bank (ADB) warned in a report Thursday that possible policy shifts in the U.S. could mean uncertainty for Asia.

The ADB report comes as Chinese President Xi Jinping and his U.S. counterpart Donald Trump are scheduled to meet on Thursday and Friday (U.S. time) at the U.S. President's Mar-a-Lago resort in Florida.

The report said rapid interest rate hikes by the U.S. Federal Reserve and “possible shifts in trade and tax policies, especially policy changes being discussed in the U.S., could create uncertainty for business, investment and export growth in developing Asia.”

Last week, Trump signed two executive orders to tackle foreign trade abuses that affect the country's half-trillion-dollar trade deficit, according to a CNN report on March 31. The orders prompt a review on the U.S.' trade deficits with its top trading partners and bolster U.S. agencies' authority in combating dumping.

China is the largest source of the U.S.' trade deficit and Trump has argued that this deficit has led to the loss of millions of jobs and the decline of U.S. manufacturing, according to the CNN report.

High-ranking officials at the White House said the measures aren't intended to impact the meeting between the two leaders who together oversee about one-third of the world's economy and a quarter of its trade. Still, Trump commented on the executive orders Friday by making note of his meeting with Xi and promised to “get down to some very serious business,” according to the CNN report.

Experts said on Thursday that China is far from the root cause of the U.S.' trade woes, but that Trump has several cards to play to address the imbalance of trade between the two partners.

“As a trading partner of China, the U.S. is too important to fall. And a stable, sustainable U.S. economy is in the long-term interests of China. From this point, we hope that the Trump administration can put the U.S. economy into better shape,” Mei Xinyu, an associate research fellow at the Ministry of Commerce, told the Global Times on Thursday.

“The root cause for the huge trade deficit lies in the ultra-low saving levels in the U.S., and that is no secret to economists. Addressing this imbalance requires the Trump administration to push forward reforms such as fixing the country's social security system and trimming defense budgets to reduce its fiscal deficit and improve household savings,” Mei said.

Xu Hongcai, deputy chief economist at the China Center for International Economic Exchange, pointed out that about 40 percent of China's trade surplus with the U.S. belongs to U.S. companies whose factories are based in China, adding that the problem for the U.S.' trade deficit is rooted in the high labor cost of America.

Addressing imbalance

Experts said a trade war won't solve the imbalance and would hurt both countries.

“If there were a trade war between the two countries, the U.S. will feel a bigger disruption than China, given the relatively low market share of U.S. products in the Chinese market and higher market share and difficulty in finding replacements for Chinese goods in the U.S. markets,” Mei noted.

Xu said that China's trade surplus with the U.S. is the result of long-time labor distribution between the two, and an abrupt change to the status quo will have a negative impact, hurting both Chinese exporters and U.S. consumers, setting up a bad example to already weakened global trade, but doing little to meet Trump's pledges. “Should China take a tit-for-tat tactic, the U.S. stand to lose more,” Xu noted.

However, Trump can address the imbalance in several ways.

“President Trump can allow more Chinese companies to invest in the U.S., which will benefit the U.S. economy with more economic activities and bring lots of jobs. One apparent cooperation in this regard is to allow Chinese companies to take part in Trump's trillion infrastructure plan, bringing to the U.S. a mixed flow of Chinese money and infrastructure expertise,” Xu told the Global Times Thursday.

The other is to allow Chinese companies to buy more high-tech products from the U.S., as these goods are needed by China in its process to upgrade its industrial capability and these trade deals will offset the deficits, Xu said.

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