Economy

Game for a laugh

Liu He titters, but Trump says a trade deal is closer

Liu-He-w

Having the last laugh?

Press conferences held in Donald Trump’s Oval Office tend to be lively affairs. Case in point was a televised gathering last Friday where Trump doled out a very public dressing-down to his chief negotiator in the Sino-US trade talks: Robert Lighthizer.

Lighthizer said he was negotiating various memorandums of understanding with the Chinese and described MOUs as binding contracts. This earned him a rebuke as Trump quickly shot back that he considered MOUs to be meaningless. Lighthizer was forced to backtrack and said he would never use the term MOU again and would stick to ‘trade agreements’.

It was such an awkward moment that Liu He, China’s top negotiator, laughed out loud. Whether the guffaw was genuine amusement or more of a nervous reflex wasn’t clear – but it’s impossible to imagine a situation in which he would clash in public with his own boss, Xi Jinping, in the same way.

Trump has wrongfooted the Chinese for much of his first term in office because he has been harder to predict than his predecessors. But his decision on Sunday to push back his own deadline to raise tariffs on more Chinese goods was a strong indication that he wants a deal. In making the extension he cited “substantial progress” in the latest round of talks. Reportedly the two sides have agreed a stability pact for the yuan and that China will buy more of America’s agricultural exports. Lighthizer also hinted this week of a new mechanism for ensuring the agreements are enforced.

Trump’s willingness to deal seems to have increased since American stocks plunged in December – suffering the worst single-month slump since the Great Depression. Trump often views the stock market as a proxy for confidence in his policies and thus did not react well to the investor sell off. Markets have gained this year on hopes that a deal will be reached – and Treasury Secretary Steven Mnuchin has apparently warned Trump that stocks might plunge afresh if the trade row is not resolved.

Bloomberg reports that the more hawkish Lighthizer views Trump’s deadline extension as a tactical error as it reduces the pressure on Beijing to give ground – but he seems resigned to the move, with his office filing papers Wednesday “suspending the scheduled tariff increase until further notice”.

Meanwhile with Trump there is also always a different dimension to any negotiation – his personality. Though he can be stupendously unpredictable, his ego is unfailingly open to being massaged. Such was the case last Friday when the Chinese side produced a moment of theatre designed to tap his love of the spotlight. A letter of greeting from Xi was read out in the Oval Office and what followed was pure schmaltz as Xi and his wife thanked the US leader for “the lovely video” of two of Trump’s grandchildren speaking Mandarin. The couple had watched the video more than once, they added, and were delighted that the “little ones” were improving their Chinese (Trump clarified to the press afterwards that the grandkids were already fluent).

It made for a bizarre scene as one patriarch praised the family home videos of the other against the backdrop of perhaps the nastiest trade conflict in living memory. But making things more personal could play to Xi’s advantage, especially in putting the American president centre-stage as a final deal draws near. Right on cue, Trump revealed plans to invite Xi to his Mar-a-Lago resort this month – provided the two sides make more headway in negotiations. “Ultimately, I think the biggest decisions and even some smaller decisions will be made by President Xi and myself,” he explained. Trump’s business friends may also prove a factor. On its front page on Wednesday the China Daily carried news of an AmCham China survey of its 771 members. The poll found that “most US firms continued to see their revenues grow in China” but their outlook had soured to “cautious pessimism” over the trade row.


© ChinTell Ltd. All rights reserved.

Exclusively sponsored by HSBC.

The Week in China website and the weekly magazine publications are owned and maintained by ChinTell Limited, Hong Kong. Neither HSBC nor any member of the HSBC group of companies ("HSBC") endorses the contents and/or is involved in selecting, creating or editing the contents of the Week in China website or the Week in China magazine. The views expressed in these publications are solely the views of ChinTell Limited and do not necessarily reflect the views or investment ideas of HSBC. No responsibility will therefore be assumed by HSBC for the contents of these publications or for the errors or omissions therein.