Trump’s threat to ‘decouple’ the US USA And China affects the reality of trade and investment

WASHINGTON (Reuters) – Contradictory talks by Trump administration officials about the “decoupling” of the US economy from China are becoming a challenging reality: Chinese imports of US goods are increasing, investments by US companies in China continues and markets are wary of separating the world’s largest economies.

FILE PHOTO: Chinese and American flags fly in Shanghai, China, June 3, 2020. REUTERS / Aly Song

White House trade adviser Peter Navarro scared Asian markets Monday night by telling the Fox News Channel that the trade deal between the United States and China had “ended.” US stock futures fell, the dollar rose, and volatility indices rose.

Navarro quickly backed down on Monday night, saying he was referring to lack of confidence between the United States and China about the coronavirus outbreak. President Donald Trump also quickly tweeted that the deal was intact.

On Tuesday, the director of the National Economic Council, Larry Kudlow, praised Beijing and told the Fox Business Network that “they have really taken up their game” when it comes to the trade deal.

Damage control efforts by the Trump administration came after Trump said last week that “a complete decoupling of China” was an option, overriding United States Trade Representative Robert Lighthizer, who had told lawmakers that decoupling was unrealistic.

Trump’s reelection campaign has made being “tough on China” a key part of his platform here. The White House blamed Beijing for the spread of the coronavirus that has killed more than 120,000 Americans, more than any other country. (See a graph here of the spread of the coronavirus in the United States)

But part of that message, that the United States is capable and willing to distance itself from its largest provider, is challenged by the realities on the ground.

Trade between the United States and China is actually on the rise, after the coronavirus caused large falls shortly after the trade deal was signed in January. Exports from the United States to China increased to $ 8.6 billion in April, compared to a 10-year monthly period of $ 6.8 billion in February, according to data from the United States Census Bureau. Imports from China shot up to $ 31.1 billion from $ 19.8 billion in March, marking the lowest monthly total in 11 years.

Data from the United States Department of Agriculture showed that soybean exports to China increased to 423,891 metric tons in April, more than double the 208,505 tons imported in March.

US officials, including Lighthizer and Secretary of State Mike Pompeo and Treasury Steven Mnuchin, have recently affirmed China’s commitment to abide by the terms of the Phase 1 trade agreement, which requires China to increase purchases of agricultural, manufactured products. , energy and services at $ 200 billion in two years.

Pompeo, asked by syndicated radio host Hugh Hewitt about the prospects for a new cold war, said Tuesday that the US economy was much more integrated with China than it was with the former Soviet Union.

“We have to think of this in a way that reflects that, because the challenges of US economic growth and prosperity are deeply intertwined today with the Chinese economy,” Pompeo said, adding that Trump was determined to protect the interests of the United States.

Mnuchin, asked about the decoupling at a Bloomberg-Invesco forum, said it would happen if American companies were not allowed to compete fairly in China’s economy.

A person familiar with US thinking. USA And China on the trade deal said Navarro’s comments appeared to be a “slip of the tongue,” reflecting his personal views on China and not the administration’s policy.

The person also said that Chinese authorities have indicated that June imports from the United States were expected to show a dramatic increase after falls in recent months due to the outbreak.


US companies had announced $ 2.3 billion in new direct investment projects in the first quarter of 2020, just slightly below last year’s quarterly average despite the coronavirus, the Rhodium Group said in a recent study here, indicating that few American companies are reducing their footprint in China.

Bill Reinsch, a senior advisor and business expert at the Center for Strategic and International Studies, said that the US economies. USA And it took China more than 20 years to grow together, and decoupling cannot be easily accomplished.

Some companies are leaving, not because of Trump, but because of rising Chinese wages and Chinese policies that have hurt foreign companies, he said.

“If you are in China to serve the Chinese market, you will stay because you cannot also serve it from the outside,” said Reinsch. “The president cannot simply order everyone to go home. Companies will make rational and economic decisions. ”

Report by David Lawder; Heather Timmons, Jonathan Oatis and Tom Brown edition

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