The Trump-Xi Summit


On April 5, the Center for the National Interest hosted a panel discussion on the likely outcomes from the upcoming summit between Presidents Donald Trump and Xi Jinping and the broader trajectory of U.S.-China relations. Speakers included Dr. Nicholas Lardy, Anthony M. Solomon Senior Fellow at the Peterson Institute for International Economics and the author of several books on China’s economy, Lt. Gen. Wallace Gregson (Ret.), Senior Director for China and the Pacific at the Center for the National Interest and a former Assistant Secretary of Defense in the Obama administration, and Harry Kazianis, Director of Defense Studies at the Center for the National Interest. Center Executive Director Paul Saunders moderated the discussion. Video of the discussion can be accessed here.

The Trump-Xi Summit

Three experts agreed that despite President Trump’s campaign rhetoric and his self-styled reputation as an “agent of change,” he and his Chinese counterpart President Xi Jinping will likely use their first meeting to reinforce the status quo both in bilateral relations and their overall postures within East Asia as they consolidate power on their respective domestic fronts. Although Washington and Beijing disagree on numerous issues, both have incentives to develop an effective working relationship and highlight “wins” to their respective audiences. Moreover, the experts concurred that North Korea and trade are likely to dominate headlines during and after the summit, though none expected significant progress in either area.

According to Dr. Nicholas Lardy, it is unlikely that there will be a detailed or nuanced discussion regarding trade and investment during the summit, as the Trump administration’s trade policy is not yet in place and is still the subject of internal debates between “nativist forces” that are losing influence and the “globally-oriented” individuals whose influence is on the rise. Xi may use the occasion to reconfirm—if not enhance—market-opening measures that have been implemented over the last few months and/or reconfirm that the China 2025 initiative will not discriminate against foreign firms.  However, Lardy added, Beijing will likely not come out with plans for a bilateral investment treaty, to which the Trump administration may be less than receptive due to the optics of U.S. firms investing abroad (and creating non-American jobs).

Regardless, “not a great deal will change” in the broader bilateral economic and investment relationship, said Lardy. Trump will not impose a tariff on China nor designate it a currency manipulator, thereby backpedaling on some of his campaign promises, he said. Lardy stated that Trump will likely continue the Obama administration’s policy of trade regulation enforcement, though this is unlikely to “bend the curve in the large and growing trade deficit” with China. Indeed, Lardy argued that the U.S. global trade deficit will rise under Trump if he proceeds with an unfunded tax cut and if the Federal Reserve raises interest rates more than anticipated (as the U.S. dollar would appreciate in value and make U.S. exports less competitive). Xi, for his part, will continue opening the Chinese market to foreign investment unilaterally and push for liberalizing currency exchange rates, said Lardy.

According to Lt. Gen. Wallace Gregson, managing tensions has been the bipartisan goal since Nixon and Mao recalibrated the relationship. The Trump administration, however, has not yet articulated a vision for the relationship, he stated. Gregson recommended that the White House concentrate on the bigger picture—particularly the United States’ alliance network in Asia—rather than on individual irritants such as Chinese breaches of protocol or harassment of U.S. naval vessels in the South China Sea. Trump should also restore candor to the relationship, he said, as it is possible to both compete and cooperate with China in various areas simultaneously and positive relationships will prove useful during more difficult conversations in the future.

Gregson described the North Korean threat as “no longer business as usual,” as previous attempts to restrain Pyongyang’s nuclear and missile development programs—particularly punitive sanctions—have been “singularly unsuccessful.” Not only does the Kim regime’s “global mafia” network enable the money to flow regardless of such measures, he said, but also Pyongyang deliberately continues its provocative behavior—whether by using the VX nerve agent to assassinate Kim Jong Un’s older brother in Malaysia or by launching a ballistic missile into the Sea of japan a few days ahead of the Trump-Xi summit. Gregson emphasizes that “they’re bad, they’re bold, and they’re going to achieve a nuclear capability—we need to take them at their word for that.” Furthermore, he argued that the U.S. should tell China that if they cannot or do not want to help with North Korea, Washington will reinforce alliance capabilities and obligations in the region in order to reestablish deterrence vis-à-vis a North Korea that is on the verge of nuclear weapons capability. This could involve revisiting a Cold War military posture and reintroducing nuclear weapons, though Gregson also noted that we should not be putting too much faith into China’s ability to control the Kim regime.

Japan, meanwhile, is seeing aerial intrusions return to Cold War levels, though Chinese rather than Soviet aircraft are carrying out those flights, said Gregson. He stated that Japan is rapidly enhancing its capabilities and improving interoperability with U.S. forces while also having adopted a joint defense doctrine. Gregson recommended that the U.S. hold “many more” bilateral exercises with Japan and demonstrate that “we are in this together with Japan.” Among the specific initiatives he recommends is a bilateral free deal that would enhance the trade relationship in light of the “self-inflicted wound”—the withdrawal from the Trans-Pacific Partnership.

Harry Kazianis asserted that the summit will not produce any compromise on the South China Sea (SCS) due to conflicting visions for utilizing near seas. Beijing views the SCS as an extension of its own territory and in pushing the “9-Dash Line” is “drawing international lines through the oceans,” said Kazianis. As is tradition with rising powers that seek control of the seas around them, China seeks to dominate the sea by “creating fake islands…[though] these islands are very real,” he said. The military facilities being built on these islands, Kazianis warned, will enable Beijing to change the status quo and provide it capabilities to establish soft control over the SCS, possibly through an Air Defense Identification Zone (ADIZ) modeled on that which it imposed on the East China Sea. Furthermore, Kazianis emphasized that China will likely have the capability to close off seaborne trade in the SCS—a major artery through which $5 trillion of seaborne trade passes, including natural resources that power the region’s economies—within the next couple of years in the event of a crisis with Japan or other neighbors over overlapping territorial claims. Echoing Lardy’s comments regarding the lack of agreed-upon policy, Kazianis said that the Trump administration has given conflicting statements regarding the SCS and is likely going through a policy review.

Regarding Taiwan and China’s goal of reunification, Kazianis stated that Trump will likely reaffirm the U.S.’ One-China policy during the summit. Beijing fears a repeat of the 1995-6 Taiwan Strait Crisis and seeks to deter the U.S., he said. China is concerned that the White House—while not backing outright Taiwanese independence—may support “independence without a declaration” and provide Taiwan additional international legitimacy via arms deals, higher-level contacts and/or a free trade agreement, said Kazianis. Kazianis asserted that the arms deal was the most likely option, as part of a strategy to “turn Taiwan into a giant porcupine” to deter a Chinese invasion. He argued, though, that the reported weapons systems under consideration—F-35 aircraft and the THAAD system—are not practical for cost and strategic reasons.

When questioned whether Trump’s unpredictability will impact Beijing’s behavior in testing the new administration and why Xi decided to meet Trump this soon, the three panelists focused on the domestic politics factor in both countries. Lardy argued that having such a summit this early in the new U.S. administration—especially with a personality such as Trump’s—was a “big risk” for Xi and itself signaled a change in Beijing’s behavior. Both Kazianis and Lardy emphasized that Xi wants to maintain stability in the bilateral relationship ahead of the 19th Party Congress this year and the anticipated leadership transition. Kazianis also drew a parallel between the desires of Trump and Xi to “make their countries great again,” which could lead either to an adversarial zero-sum relationship or highlight opportunities where they can cooperate. Gregson said that while neither leader is “sitting in a terribly rock-solid position” and that some accommodation may be reached so that both leaders come out of the summit “looking good,” Xi’s grasp on power is not absolute and this, along with a desire to avenge the “century of humiliation” and a slowing economy, contributes to sensitivity regarding territorial claims—not to mention Xi’s adoption of the “mantra of undisputed historical sovereignty” over the SCS.