The leaders of the globe’s two largest economies will meet in the week ahead among the gilded rooms of Mar-a-Lago, an estate evoking a time of American economic ascendance. President Donald Trump will host Chinese President Xi Jinping for a day and a half of high stakes international diplomacy and economic gamesmanship.
As a candidate, Trump threatened to slap a 45 percent tariff on Chinese imports. While that may be Trump’s opening offer (as he likes to refer to such rhetoric), China response was interpreted as a tariff threat of its own. China is the biggest market for American exports from 33 states. China is the second largest holder of American government debt. Meantime, America is the second largest buyer of Chinese-made goods. This dynamic underscores the deep economic ties between the two countries well beyond the walls of a seaside private club.
Since taking office, Trump has pulled out of the Trans-Pacific Partnership trade deal and, just last week canceled, Obama-era climate policies. Both actions bring with them the potential of China filling America’s void. China is not a party to the TPP, but America’s absence could provide China with an opening for corralling its Asia neighbors in its own trade deals. Similarly, should China decide to move forward with its pledge to cut greenhouse gas emissions while the U.S. doesn’t, it — not America — could become home to clean energy innovation.
These are just a few of the macroeconomic stakes involved as the two leaders meet in the week ahead. Both countries hold sway, something long-term investors must recognize. China is Boeing’s biggest market. Chinese-made Apple iPhones have translated into billions in profits for its shareholders. Meantime, Netflix and Google have left China over the government’s control of the Internet and favoritism for Chinese firms. Facebook and Twitter are blocked in China.
An evenhanded, diplomatic (dare I say presidential) performance will reassure investors mutually destructive economic policies will not distinguish U.S.-China relations.
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami. Follow him on Twitter @HudsonsView.