Divisions within Trump’s Team Lead to Renewed US-China Trade Tensions?

By Joyce Yu

Philadelphia, PA–U.S. stocks rebounded Wednesday after massive market selloff sparked by fears over Italy’s political turmoil and renewed US-China trade tensions. Some policy matchers expressed concerns over Sino-U.S. trade relationship ahead of a scheduled meeting between Commerce Secretary Wilbur Ross and the Chinese side, blaming the irresolution coming from lasting divisions within Trump’s team.

China and the U.S. reached an initial agreement earlier this month with China agreeing to “significantly increase” purchases from the United States, particularly buying more agriculture and energy exports. This is followed by a television interview with Treasury Secretary Steven Mnuchin who said that the trade war was “on hold.” Almost immediately, Robert Lighthizer, U.S. trade representative, put out a statement warning that major issues between the two sides remain unresolved, and that tariffs, investment restrictions and export regulations remained on the table.

In response to the White House’s announcement, China’s Commerce Ministry said in a statement that the announcement is “obviously in violation” of the recent agreement.

China has no reason to address issues brought up by the United States if the government’s priorities appear to be constantly in flux, Eric Altbach, senior vice president at Albright Stonebridge Group and former deputy assistant US trade representative for China under President Barack Obama, told CNN.

“When the leadership of the trade agenda is oscillating between Mnuchin and Lighthizer, it doesn’t motivate anyone — particularly the Chinese — to start making major concessions,” Altbach said.

One of President Donald Trump’s chief tactics in negotiations has been unpredictability and he’s also made a habit of threatening unilateral action to try to gain leverage in trade disputes, as noted by a CNN report. “If we’re trying to change Chinese behavior, these noisy signals aren’t going to get us there,” said Phil Levy, senior fellow on the global economy at the Chicago Council on Global Affairs and a former senior economist in the George W. Bush administration, in the same report.

The Wall Street Journal quoted sources saying that the Trump administration’s decision to pursue the $50 billion in taxes could jeopardize a bilateral meeting to be held this week. A U.S. advance team landed in Beijing Wednesday to prepare for Commerce Secretary Wilbur Ross’s arrival later in the week. Some analysts, on the contrary, think this could be an attempt to gain influence ahead of those talks.

Despite some recovery in the market this morning, investors remain cautious for greater clarity. Rick Rieder, managing director of BlackRock said, “Considering a lack of discernible trading momentum, heightened volatility and a diminished ability to hedge, one might feel an overt pessimism toward today’s market opportunity set,” he wrote in a blog post last month. “Not us; we perceive a half-full glass.”