Sometimes we just read and think; sometimes we just read and laugh. This is the latter.
China continually looks at President Trump and the U.S. trade position through the wrong prism. Those around Chairman Xi genuinely seem to be incapable of understanding a U.S. President who independently represents long-term U.S. larger interests, and simultaneously leverages the U.S. market as a customer in a one-sided transaction.
The disconnect in Beijing analysis of the dynamic is really quite something.
After last weeks strategic magnanimous panda maneuver, Beijing was shocked, shocked, that President Trump continued to maintain “wrong thinking” toward the upcoming discussion with Chairman Xi.
It appears China fully expected some reciprocal trade bargaining based on their implied promise to release North Korean Chairman Kim Jong-un from manipulation; but Trump didn’t flinch. Instead, of acquiescence to magnanimous panda, President Trump sends Chairman Kim a letter filled with “excellent content“. Beijing was snubbed.
So yesterday as a follow-up Beijing indicates a willingness to revisit the prior agreement by putting the face of Vice-Premier Liu He back into their negotiation position:
(Reuters) […] Chinese Vice Premier Liu He held a phone conversation with U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin, China’s Ministry of Commerce said in a statement posted to its website on Tuesday morning. (more)
Liu He was the chief negotiator for Chairman Xi, and was stripped of the official title as spokesperson for the Xi regime after Beijing reneged on the deal. The message was clear: during the three months of negotiations Liu He had agreed to too much structural change on China’s side of the trade confrontation. The deal was scrapped by Beijing, and Liu He was stripped of his special envoy status as a person speaking for Chairman Xi.
By putting Liu back into the discussion this week, Beijing was signaling a willingness -likely a ruse, but a willingness nonetheless- to revisit the terms that existed prior to the breakdown.
The G20 is rapidly approaching… Beijing needs to identify POTUS Trump’s position. Things in Beijing are urgent as preparations (mostly optics) for how Chairman Xi will engage with President Trump are needed.
So into this dynamic of China evaluating where they can expect to find their position, we’ve got two signals from a series of public messages: (1) magnanimous panda will give up DPRK nukes, in exchange for better terms; and when that didn’t get the desired result, (2) China signals they are willing to revisit the prior terms.
However, today Team Donald Trump responds to the messages: NO DEAL !
Trump is mirroring the historic approach deployed by China. Beijing is facing a new dynamic where the U.S. President will not accept any retreat from his current position. This zero-sum outlook is exactly the same approach all Chinese negotiators use…. only this time it’s Trump using their strategy against them. It’s President Trump who will not retreat from gained position. This has to be seriously perplexing for Beijing.
Now, to be fair, unlike China President Trump is not constitutionally predisposed to never give ground… he’s a negotiator of reasonable compromise. However, President Trump has modified his approach based on his knowledge of his adversary.
In essence, Donald Trump is mirroring the ideology and negotiating position of the person on the other side of the table….. only now, based on two-years of groundwork in preparation for his position, President Trump is carrying all the strength and leverage.
China is on its heels. Trump has set up a dynamic where a pre-planned group of regional allies can easily compensate for any manufacturing deficit caused by Trump’s adversarial position toward China. The corporate exodus visible within this plan has already begun.
The G20 is being held in Osaka, Japan. Essentially President Trump’s home turf as expressed by his relationship with Prime Minister Shinzo Abe and the recent high-honor of the first state visit to celebrate new Japanese Emperor Naruhito.
The geography for the G20 is perfect for this moment. The dynamic of regional allies are all aligned with Trump as planned from the November 2017 ‘golden ticket‘ tour of Asia. Additionally, President Trump carries all of the economic leverage he was quietly assembling as Beijing underestimated and misinterpreted the Trump bravado.
At no time in history has a U.S. President ever had all of the consequential dynamics aligned in his favor. This did not happen accidentally.
That’s why U.S. officials are saying they are not coming to the meeting with any concessions, and for the first time in modern history Beijing will have to make the compromise, or suffer a very visible set of consequences.