Pro Perspectives 10/9/19

October 8, 2019

Prior to the high level U.S./China trade talks tomorrow and Friday, the U.S. took the opportunity to ramp up the offense. 

The Trump team blacklisted eight Chinese tech firms and restricted the visas on some Chinese officials, all of which they associated with human rights abuses on Muslim minorities in China. 

Why now, just as they head into trade negotiations again?

Leverage.  Trump has always had leverage over the Chinese on these negotiations, and has been in complete control (able to make concessions and pull the trigger on a deal at any time).   But that leverage has eroded in recent months. 

The Chinese Communist Party (CCP) has gained some leverage, as the U.S. economy has softened, and as the 2020 election draws closer.  China has had the option of holding out, if they think the prospects are favorable for seeing a new U.S. President next year. 

With that, as they come to Washington to resume negotiations, it appears that Trump has found an angle to dissuade the Chinese from turning their backs on a deal.  By taking aim at the human rights abuses of the CCP, he telegraphs how the specter of the fight might change.  He draws in the other half of America (the other party), and U.S. allies, that have been apathetic if not annoyed by the distraction of a fight (in their view) over a trade imbalance.  Up to just a few months ago, the Democratic candidates had no interest in talking about China.  If China chooses to hold out now,  and Trump subsequently escalates the focus on China’s human rights record, then the "dealing with China" topic could easily become the biggest issue in the election. 

With that, despite the criticisms of the moves yesterday, China has sent their A-team to Washington.  We'll see if Trump opts for a cut-down deal, with the plan of going after the bigger demands after the election.