The failed summit between President Donald Trump and North Korean leader Kim Jong Un has “injected an element of uncertainty” to the outlook of a U.S.-China trade deal, said Derek Scissors, an economist at the American Enterprise Institute.
Prior to the summit, Scissors said it seemed clear the U.S. and China trade talks were on track toward an agreement, and Trump was effusive in his praise of Chinese President Xi Jinping in the runup to the North Korea talks.
Now, this calculus could be upset, especially if the president detects China played a role in his failed talks in Hanoi, Scissors said Thursday during a presentation at the National Association for Business Economics.
“If it were the case… that the president came to conclude that China had not done what he thought they were going to do, that would be a serious threat to the trade deal,” he said.
The summit with North Korea “personally mattered to the president,” he added.
Scissors said a shift in Trump’s attitude toward Xi is still not his “base case” forecast. He said there is about “a 20% chance” now that we might get a very different presidential attitude on a trade deal, he said.
Yasheng Huang, a professor at MIT’s Sloan School of Management, said Trump’s abrupt departure from the talks with North Korea may be a “signal to Xi.”
He said Trump might have staged the walkout to show that he could walk away from any deal.
“This might catch Xi’s attention,” Huang said.
Overall, Scissors was dismissive of the outlines of the trade deal that had been emerging from the U.S.-China talks.
He said that Trump decided in November he wanted an agreement and is accepting one that China was willing to accept as soon as the president was sworn in.
“We’re just not having a serious discussion,” Scissors said.
It looks like China is going to buy some commodities in return for removal of the threat of 25% tariffs, he said. “This deal could have been literally at the start of the Trump administration.”
And leaks from the talks that China has agreed not to devalue its currency are not new, Scissors said, noting that Chinese officials promised not to weaken the yuan 20 years ago and have kept their promise.
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