President Trump has been a harsh critic of Chinese trade policy and has openly expressed his desire for tariffs. Yet Chinese leaders are speaking favorably about liberalizing Chinese trade and domestic economic policies. Meanwhile, China is also poised to undertake a host of new economic initiatives in the Asia-Pacific region, including participation in the Regional Comprehensive Economic Partnership, the Asian Infrastructure Investment Bank, and its own One Belt One Road initiative.
For example, in April China’s National Development and Reform Commission announced that it would raise ownership limits on foreign car producers, who were previously limited to 50 percent under joint-venture requirements. Price supports on corn, cotton, soybeans, and sugar have been removed, and in July China announced that it will allow imports of U.S. rice.
Moreover, China seems to be angling for a position as a trade leader in the Pacific. Chinese trade leadership in the region would ensure that China remains assertive and engaged in the global community, which is much preferable to a politically isolated China, as it was from the 1940’s-1970’s.
Most importantly, China’s success is the U.S.’s — and the world’s — success. As the leading trade partner for the U.S., Australia, Japan, South Korea, and other major Asia-Pacific economies, a reduction in Chinese growth would negatively impact the global economy. A 10% drop in Chinese imports, as the result of a 1% Chinese GDP growth slowdown, could lead to a 1.2% loss of export revenue GDP globally.
Some warn against allowing China to achieve a larger role in the region, but given that President Trump has withdrawn the U.S. from the TPP, accepting China’s role as a trade leader is the best bet. Policymakers should avoid unnecessary trade spats, work toward liberalizing trade and investment through bilateral agreements, and stay focused on initiatives to keep the United States commercially engaged in Asia.