Although it’s not clear that CEOs will feature heavily at this week’s summit between Donald Trump and Xi Jinping, as they did when Angela Merkel was in town, the momentous meeting could have far more profound implications for the business community.
Trump already has started posturing aggressively from his Twitter pulpit, and, on Sunday, even raised the possibility of using North Korean security issues as a bargaining chip in trade negotiations.
For CEOs, a key risk is that relations between the two countries deteriorates, bringing them closer to a trade war that would make it harder for U.S. companies to do business in China and vice-versa.
The punitive trade tariffs of up to 45% on Chinese imports mentioned by Trump could push up the cost of goods and services that American companies source from overseas, though there’s hopes the two leaders can strike a few deals when they meet at Trump’s Mar-a-Lago retreat in Florida from Thursday.
American CEOs, including FedEx’s Fred Smith, while generally supportive of free trade, have acknowledged that China remains relatively hard for foreign companies to enter, giving Xi some leverage to offer Trump concessions. Any promises to further open up the Chinese market would be great new for U.S. companies, given the sheer size of the opportunity to acquire new customers in the still fast-growing economy.
Indeed, Chinese authorities are attempting to help transition their economy to one that’s more driven by domestic consumption—a change that Xi could tell the president will increase demand for American exports. And like Japanese Prime Minister Shinzo Abe reportedly did before him, Xi could highlight the potential for Chinese companies to invest billions more in their American operations, creating more American jobs.
Trump indicated yesterday that he may offer a softer approach on trade barriers, should China agree to take a harder stance on North Korea. But in a Twitter post last week he gave little indication of easing back on his aims to reduce America’s $300 billion trade deficit with the world’s second-largest economy.
“The meeting next week with China will be a very difficult one in that we can no longer have massive trade deficits and job losses,” Trump said in the post. “American companies must be prepared to look at other alternatives.”
On Friday, Trump signed two executive orders calling for an investigation into possible trade abuses and a crackdown on import duty evasion. The Chinese government responded over the weekend by asking the U.S. to respect international trade rules and keep dialogue between the two countries open.
“China is willing to cooperate with the United States on a basis of equality and mutual benefit,” a spokesperson for China’s Ministry of Commerce said on its website.