KRWG

Trump's "America First" Message In Asia

Nov 21, 2017

Commentary: President Donald Trump recently completed a 12-day, five-nation tour of Asia, his first trip to the region as president. During this whirlwind tour, in which he visited Japan, South Korea, China, Vietnam, and the Philippines, I read as many reports as possible detailing his trip and his interactions with Asian counterparts, but two things struck me:  his visit to China, and his speech at the Asia-Pacific Economic Cooperation (APEC) conference, held in Danang, Vietnam. 

During his presidential campaign and while in office, Trump’s rhetoric on China and its trade surplus with the U.S. has been fiery and bombastic.  During the campaign, Trump threatened to label China as a currency manipulator that was taking advantage of a favorable exchange rate to run up a huge trade surplus with the U.S. He often has stated that he would be addressing the trade deficits that the U.S. runs with countries such as China and Mexico by imposing stiff tariffs on their exports to the U.S.

Trade deficits are complicated. In 2016, the U.S. exported $116 billion to China, while it imported $463 billion, resulting in a $347 billion trade deficit - the highest trade deficit the U.S. has with any country. This technically means that there is an outflow of capital from the U.S. to China, and if Americans are manufacturing fewer products to ship to China this should result in losses of American jobs. However, this isn’t a black and white issue. If Americans were forced to buy their consumer products in the U.S. at a higher price than they are importing from China, we would have less money to spend on other items, such as cars and homes. Many Americans would not be able to afford the standard of living they currently have or have access to the wide variety of consumer products that have been become the hallmark of modern living.

Economists and CEOs have long complained that China routinely restricts local market access to U.S. companies, while requiring that they form joint ventures to operate in China and share their intellectual property and technology. Many of these people were expecting Trump to take his tough rhetoric to China and Xi Jinping, its president. Many others were waiting to hear Trump speak frankly in China about its trade surplus with the U.S. While in China, instead of tearing into the Chinese leadership about a more equitable trade relationship and opening up closed markets in that country for U.S. companies, he tried hard to curry favor with Xi, calling him a “very special man” and stating, “I don’t blame China. Who can blame a country for being able to take advantage of another country for the benefit of its citizens? I give China great credit.” Perhaps, behind doors tough and frank conversations were held, but publicly very little in this sense was forthcoming. Trump did announce the creation of $250 billion in deals between U.S. and Chinese companies, but no details were announced as to whether these were deals already in the works or at what time in the future they would take place.

The second thing that struck me about the trip was what happened at the APEC conference in Vietnam. During Trump’s speech, he stated, "We are not going to let the United States be taken advantage of anymore. I am always going to put America first, the same way I expect all of you in this room to put your countries first." After Trump, President Xi made a speech in which he stated that globalization was a factor that was “irreversible.” And sounding very much like typical American politicians who traditionally have espoused the U.S. brand of capitalism throughout the world, he went on to discuss a future of innovation, technology, issues surrounding climate change, and a call for APEC leaders to work together to move the region forward.

Besides the irony of a Chinese leader using more traditional American rhetoric than the current U.S. president, it is obvious that China sees the backing away from the Trans Pacific Partnership by the U.S., and Trump’s threatening language to renegotiate the North American Free Trade Agreement (NAFTA) with its neighbors, as a void being created by the U.S. that the China can fill.

From a political standpoint, Trump’s “America first” message might come back to haunt him if he tries to build coalitions to deal with hot spots in areas such as North Korea or Niger. From an economic standpoint, superpower economies such as China, which has an explicit goal to dominate Asia politically and economically, must be looking at the U.S.’s rhetoric and action as a gift in which it can move quickly to achieve its objectives, and not only in Asia. There has been a noticeable increase in the presence of Chinese representatives and businesspeople in Latin America. If NAFTA cannot be renegotiated to the satisfaction of the U.S., Mexico and Canada, and the agreement is rescinded, China sees itself as the country to step in.

The results of Trump’s trip to Asia may take months or even years to develop. Given Trump’s propensity to go in one direction and then back away, it also is possible that nothing substantial will transpire. However, both trade allies and nemeses have to be left scratching their heads wondering what path the U.S. will really take.  

Jerry Pacheco is President of the Border Industrial Association.  His columns appear in The Albuquerque Journal.