Impeachment Inquiry Could Spur China Trade 'Mini-Deal'

Impeachment Inquiry Could Spur China Trade 'Mini-Deal'
AP Photo/Evan Vucci
Impeachment Inquiry Could Spur China Trade 'Mini-Deal'
AP Photo/Evan Vucci
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Larry Kudlow, President Trump’s voluble, media-friendly chief economic adviser, earlier this week tried to throw a brush-back pitch when questioned about the impact of Democrats’ impeachment pursuits on the latest round of China trade talks.

Reporters specifically asked how Trump’s call for China to investigate Joe and Hunter Biden would affect renewed negotiations between the two superpowers, and Kudlow dismissed any suggestion that the two were connected.

“The president’s view is there is no linkage between that and the trade talks,” he told media members gathered in the White House driveway.

The former CNBC host then upped the ante, putting the onus of controlling worldwide perception on himself.

“I guarantee there will be no linkage,” he said.

Kudlow’s comments fueled dozens of headlines even as trade and economic experts dismissed them as nothing more than wishful thinking.

In reality, few outside the White House are de-linking the impeachment inquiry from this week’s trade talks, set to begin again on Thursday.

But it’s not all bad news for business. Some China experts are predicting the impeachment cloud hanging over Washington could actually work to grease the wheels for some type of incremental deal that would give Trump a win and help settle the jumpy stock market before the 2020 campaigns revs into higher gear.

“This impeachment activity could cut either way,” David Dollar, a China expert at the Brookings Institution, told RealClearPolitics. “The president needs some kind of win to get the economy juiced up and he has the incentive to do so” before the presidential race gathers steam.

Dollar also dismissed speculation that China might be inclined to wait to see if Trump is impeached, given the unlikely scenario of his removal from office.

“I find that implausible,” he said. “[The Chinese] are tough negotiators, but they’re also straight-forward. If they see that the administration is willing to stop the [sanctions] escalation, then they will buy the agricultural products they know will help Trump in certain states.”

Stocks tumbled 300 points lower Tuesday as investor hopes started fading for a big, comprehensive deal Trump said he’s still aiming to get.

“I would much prefer a big deal, and I think that’s what we’re shooting for,” the president told reporters Monday. “Can something happen? I guess, maybe. Who knows? But I think it’s probably unlikely, okay?”

Those remarks were murky enough, and then more clouds started forming over the talks. The administration this week sent strong signals that it wouldn’t set aside other U.S. concerns about Chinese policies in order to ease the path to a comprehensive trade pact.

The U.S. on Tuesday placed visa restrictions on Chinese officials for their ongoing abuses of Uighur Muslim minorities in China’s northwest territory. The move followed an administration announcement Monday to blacklist more than two dozen public security entities and companies the U.S. believes are involved in the surveillance and detention of minority groups.

Beijing vigorously objected to what it labeled U.S. meddling in China’s internal affairs and has signaled a growing hesitance to pursue a broad trade deal just days before talks are set to begin.

Market investors are setting their sights on a mini deal that could stave off higher U.S. sanctions scheduled for Oct. 15 and later this year in return for China purchasing far more agricultural goods from key states in the Midwest, which could help Trump politically.

The two sides are much farther apart on myriad other disputes, which include a U.S. desire to curb Chinese industrial subsidies and fierce security-related disagreements over Huawei and 5G technology.

These differences, along with U.S. and other Western countries’ concern over Beijing’s Made in China 2025 plan to dramatically upgrade the country’s manufacturing capabilities, “set the stage for a prolonged conflict,” argued Vishnu Varathan, head of economics at Mizuho Bank, in a morning note.

“The means and (presumable) motives for acrimony in the US-China relations are outpacing the options and the ability to find solutions/compromises to arrive at a deal,” he added.

Other analysts said China’s decision to take the administration’s core demands off the table is a sign of Beijing’s strengthening hand as Trump is forced to grapple with impeachment headlines as well as a slowing economy the trade war is partly causing.

Scott Kennedy, a senior adviser and China expert at the Center for Strategic and International Studies, predicted no major deal this week as both sides continue posturing ahead of more critical dates in the weeks ahead.

“Expect superficial theatrics this week & proposal to make progress” by the Nov. 16-17 Asia-Pacific Economic Cooperation summit in Santiago, Kennedy tweeted Monday.

The threat of impeachment inevitably impacts the U.S. negotiating position, Dollar argued, although he said it’s difficult to determine exactly how.

“One of my worries is that this distracts the administration officials at the working level,” he said, referring to negotiators who often do the granular heavy lifting for major trade deals before talks between Cabinet-level secretaries begin.

“If Trump keeps everything controlled in his hands, if he is distracted by impeachment, the Cabinet members don’t feel empowered” to direct their staffs to start laying the groundwork on key aspects of a potential deal, he said.

Administration officials have also spent the last few months discussing placing restrictions on U.S. government retirement funds investing in Chinese firms, though White House trade adviser Peter Navarro dismissed reports about it last week as “fake news.”

“Welcome to Washington!” Kennedy tweeted, addressing Chinese trade negotiators. “The Trump administration is rolling out the red carpet, literally, w/possible limits on USG-related pension funds’ China exposures, entities list action on 28 Chinese companies, & more in the pipeline.”

Susan Crabtree is RealClearPolitics' White House/national political correspondent.

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