Hong Kong protests add twist to US-China trade talks

Hong Kong protests add twist to US-China trade talks

After an estimated 1.7m protesters took to the streets of Hong Kong on Sunday for a new round of demonstrations, US president Donald Trump could no longer dismiss the events as a Chinese internal affair that had little or no bearing on the US.

So from the tarmac of Morristown airport in New Jersey, as he headed back to the White House from a weekend at his golf club, the US president fired off a warning to his Chinese counterpart Xi Jinping, linking developments in the city state to a possible trade agreement.

“I think it would be very hard to deal if they do violence. I mean, if it’s another Tiananmen Square,” Mr Trump said. “I think there’d be tremendous political sentiment not to do something,” he said.

It has always been possible that unrelated tensions in the US-China relationship might scupper the talks to end the trade dispute — consider the arrest in Canada of Meng Wanzhou, the Huawei chief financial officer, on the day of the G20 summit meeting in Buenos Aires in December last year.

But the longer the trade dispute drags on, the more likely it is that any settlement could be derailed by the deterioration of diplomatic and security relations between the two countries. Hong Kong at the moment is the biggest wild card. An aggressive crackdown by Mr Xi against the protesters would spark a sharp backlash on Capitol Hill, where there have been multiple expressions of support for the demonstrations from both Republicans and Democrats.

Mr Trump hasn’t shown much interest in human or political rights, nor has he cared much about heeding the mood among members of Congress, but Hong Kong might be different. After casting himself as tough on China for so long, Mr Trump could not be seen to be striking an economic accommodation with Mr Xi in the midst of a repression.

There are other hotspots.

Last week, the Trump administration approved the sale of $8bn of fighter jets to Taiwan, on top of a weapons sale worth $2.2bn approved earlier this year, cementing a military relationship that is frowned on in Beijing.

The US state department, under Mike Pompeo, has spoken out against the Chinese mass detention and discrimination against the Uighur community in the western province of Xinjiang. While Mr Trump has shown scant interest in their plight, vice-president Mike Pence has been considering delivering a pugnacious speech attacking China’s human rights record, according to multiple reports.

Mr Pence’s remarks were originally supposed to be delivered in early June, but were delayed several times in order not to hamper the trade negotiations. Now there is talk that the speech may be on the agenda again in the autumn, which bodes poorly for any big deal between Mr Xi and Mr Trump.

US public moves towards free trade — but don’t ignore the rust-belt states

A paradox of the Trump era is that while the US president has unleashed a rash of protectionist measures, the American public has grown increasingly sympathetic to open trade.

A WSJ/NBC poll released on Sunday found support for free trade has reached an all-time high of 64 per cent, compared with 27 per cent who oppose it. At the end of Barack Obama’s presidency, 51 per cent backed free trade and 41 per cent opposed it.

The striking thing about the poll is that Democrats are now overwhelmingly in favour of free trade, even though at least two leading contenders for the presidential nomination, Bernie Sanders and Elizabeth Warren, are trade sceptics.

But the shift doesn’t seem to be just about a reflexive aversion to Trumpism. Independents and Republicans have also become more embracing of free trade during Mr Trump’s presidency, perhaps out of disappointment with the White House’s use of tariffs.

There are a few noteworthy caveats. In other polls that have drilled down on specific questions, such as whether free trade boosts employment and wages or lowers prices, the assessment has been far more negative.

In addition, the judgment on trade in the Midwestern and rust-belt states that are likely to decide the presidential election may be less rosy than it is nationally.

But if the Democrats do plan on trying to outflank Mr Trump by being more protectionist than he is, it might not resonate as much as they hope.

The number: 96.8 per cent

Share of Chinese imports that will be subject to US tariffs come December 15, courtesy of Chad Bown of the Peterson Institute for International Economics. The remaining 3.2 per cent have been exempted.

Chart choice

Should the US try to weaken the dollar? From EconoFact, courtesy of the Fletcher School at Tufts University.

Should the United States Try to Weaken the Dollar?
Should the United States Try to Weaken the Dollar?

Further reading

● A synchronised global recession is coming — by Rana Foroohar (FT)

● The generational clash in Washington on China policy (Washington Post)

● Trade of the century? Trump’s Greenland bid gets an icy reception (Reuters)

● The struggles of Jay Powell, Fed chairman, as he grapples with Trump and his trade wars (Wall Street Journal)

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