Trade is high on the agenda for Donald Trump’s whistle stop tour of Asia, with the US president making deals on energy and infrastructure.
Trump touched down in China today, accompanied by a large delegation from the energy sector. The US entourage is expected to seal deals to export LNG to China, signalling a shift away from the aggressive rhetoric towards China during last year’s election campaign.
Ahead of Trump’s arrival, Goldman Sachs teamed up with the sovereign China Investment Corporation to launch a US$5bn investment fund for US manufacturers, details of which are to be announced on his visit to Beijing.
“If we saw something on LNG that could be a game changer for the trade deficit, which seems to be the main objection of the Trump administration,” Tom Rafferty, Asia manager at the Economist Intelligence Unit tells GTR.
There may also be some movement on a service sector agreement, which China has officially committed to opening up, but this is unlikely to go as far as adjusting the joint venture requirements for banking and insurance, Rafferty says.
Trump’s first state visit to East Asia has already brought him to Japan, where agreements were reached on energy and infrastructure, and South Korea, where he further threatened North Korea and urged China and Russia to join the US-led sanctions regime aimed at the rogue state.
In Japan, meetings on the sidelines of the state visit saw Japan’s export credit agency and insurer sign memoranda with the Overseas Private Investment Corporation (Opic, the US government’s development finance arm) to jointly invest in infrastructure projects in Asia Pacific, the Middle East and Africa.
The Japanese and US governments also established an energy partnership which will boost US LNG exports to Asia.
Trump blasts deficit
Trump’s trip to Tokyo was not without controversy, however. He lambasted the Japanese Prime Minister Shinzo Abe for flooding the US with automotive imports, despite the fact that a significant portion of the Japanese branded cars sold in the US are made in the US.
This was no shock, however, given the forceful anti-globalisation ticket on which Trump ran for office, to which he has frequently returned since his election.
“I am not surprised with his comments on specific industries. It’s the aggressive way he is trying to get jobs back to the US. If you look at his campaign, the focus was on jobs and wages. Whether it makes sense from an academic trade perspective is completely irrelevant in the Trump calculus. He’s continuing to discuss jobs and wages in manufacturing,” says Tony Nash, the chief economist at Complete Intelligence, a Singapore-based research firm.
Throughout the week, the subject of trade deficits has been a popular talking point for Trump. His views are notoriously reductive and have been criticised by some experts for being misleading.
“He has the view that deficits are bad and surpluses are good, which is very naïve. They’re mutual gains from trade. Imports help you export. So this idea that you have to balance bilateral trade relationships is silly. I have a persistent bilateral trade deficit with my hairdresser. I pay him for my haircuts but he doesn’t pay me for economic advice, but that’s not a problem. The main issue is that overall I am able to accommodate my individual bilateral deficits with restaurants, hairdressers and the like through a specific relationship, which is my work with the Asian Development Bank (ADB),” Jayant Menon, lead economist at the ADB, tells GTR.
Later this week, Trump will visit Vietnam, for the Asia Pacific Economic Cooperation (APEC) Summit in Da Nang, before travelling to the Philippines for an East Asia Summit in Manila.
In a delicious twist of irony, Trump could be in Da Nang when a meeting of trade negotiators finalise the Trans-Pacific Partnership (TPP) agreement from which he withdrew the US upon entering the White House in January.
The TPP-11 hope to conclude their agreement at the summit, with Japan thought to be lobbying strongly to get it over the line. Meetings have been ongoing this week, with Canada and New Zealand said to be keen to work through problematic areas, rather than thrashing out a deal in Vietnam.
Last week, GTR reported that New Zealand’s new Prime Minister, Jacinda Ardern, was set to oppose the investor-state dispute settlement (ISDS) clauses of the TPP, after pressure from her coalition partners in government.
However, in an interview with Bloomberg today, Ardern’s tone had softened. She said: “There are clear benefits for our exporters in this agreement. New Zealand does not have the access to, for instance, the Japanese market that the Australians do. This would bring benefits to our beef industry, our wine industry, our kiwifruit industry.”
She also appeared to admit that her efforts to remove ISDS from the agreement at this late stage may be doomed to fail: “Our objective has been to raise the issue, to pursue it as far as we’re able. I acknowledge that there are competing interests and competing timelines from other member states. We accept that it is very late in the piece.”
For Trump, security is likely to top the agenda here and at the East Asia Summit in Manila, but it is also likely that his team will be putting in some groundwork for bilateral trade deals.
“Trump has made it clear that he’s keen on doing bilateral deals. So far there’s not been much action on trade or anything else but this could be the chance to start talking with individual countries, because that’s his preferred modality going forward, not these mega-regional deals,” Menon says.