China Envoy Seeks to Defuse Tensions With U.S. as a Trade War Brews

By | Mar 02, 2018 02:13 PM EST
Liu He, President Xi Jinping’s top economic adviser
(Photo : Markus Schreiber/Associated Press)

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Liu He, President Xi Jinping’s top economic adviser, plans to tell American officials about areas where the Chinese economy will be opening up and push for an official commitment to restore economic meetings between the two countries.

China's top economic adviser arrived in Washington this week in an attempt to defuse rapidly escalating tensions with the United States as the prospect of a trade war between the world's two largest economies looms.

But Liu He, the American-educated technocrat who is now President Xi Jinping's top economic adviser, may face an insurmountable task. The Trump administration appears less predisposed to engage with China than perhaps any other White House in decades - a dramatic turn given the United States' long campaign to persuade China to open its markets to American products and investment.

President Trump and his top trade advisers share a widespread view that China cannot be trusted to negotiate in good faith and believe that past administrations spent fruitless years pushing the Chinese to make minor changes to their economy that arrived too late, and were too often reversed.

News that Mr. Xi has moved to abolish term limits for himself and his vice president has only increased suspicion in recent weeks that China has no intention of shifting toward a more market-oriented economic model and plans to have a state-dominated economy.

The lack of engagement is a worrying sign for relations, given that the Trump administration is now poised to deliver what could be the harshest economic sanctions on China in decades. In the coming weeks, the administration will decide whether to impose stiff tariffs on Chinese steel and aluminum and restrict investments to penalize China for its alleged theft of American intellectual property.

Economists fear trade sanctions could prompt retaliation from China, and even tip the world's two largest economies into a trade war that would harm businesses and consumers in the United States and abroad.

"Certainly, the United States has gotten China's attention with these threats," said Susan Shirk, a former diplomat and the chairwoman of the 21st Century China Center at the School of Global Policy and Strategy at the University of California, San Diego. "The question is, what are we going to do with that attention?"

Ms. Shirk said the Trump administration seemed to have little interest in negotiating an outcome that would benefit both sides. If the United States chooses to take a more punitive approach, "then I think we are at the brink of heading for a more Cold War-type relationship," she added.

Mr. Liu has been dispatched to Washington to evaluate the likelihood of such a clash, as well as to try to defuse tensions. He plans to tell American officials about areas where the Chinese economy will be opening up and push for an official commitment to restore economic meetings between the two countries, which stalled after a falling-out over trade in July.

Mr. Liu was scheduled to meet with a handful of top executives from American companies and organizations on Wednesday, including Jamie Dimon of JPMorgan Chase; Laurence D. Fink of BlackRock; David M. Solomon of Goldman Sachs; Marc Allen of Boeing; Evan Greenberg of Chubb; Henry M. Paulson Jr., the former Treasury secretary; and Myron Brilliant, of the U.S. Chamber of Commerce.

On Thursday, Mr. Liu and a Chinese delegation will jointly meet with top administration officials including Gary D. Cohn, director of the National Economic Council; Robert E. Lighthizer, the United States trade representative; and Steven Mnuchin, the Treasury secretary, for a "frank exchange of views on the trade and economic relationship," a White House official said. Mr. Liu will not meet with the president himself.

Mr. Trump's aides, including Mr. Lighthizer, have discouraged the president from engaging with China. It has been a shift from Mr. Trump's first months in office, when he warmly received Mr. Xi at Mar-a-Lago and started a new "Comprehensive Economic Dialogue" between the countries that would include 100 days of talks over trade.

But when Commerce Secretary Wilbur Ross presented the results of those talks to the president, Mr. Trump, counseled in part by Mr. Lighthizer, concluded the outcome was a bad deal for the United States, according to people familiar with the matter who were not authorized to speak publicly. One of the breakthroughs from the 100 days of talks, China's agreement to start receiving shipments of American beef, was first promised to the Bush administration. Another deal, to lift caps on foreign investment in Chinese insurance, banking and securities, had already been pledged to President Barack Obama.

An earlier version of this article misstated which U.S. Chamber of Commerce executive attended the meeting with Liu He on Wednesday. Myron Brilliant, executive vice president at the U.S. Chamber of Commerce, attended Wednesday's meeting, not Thomas J. Donohue.

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