In an effort to stave off a trade war, China has made an offer to President Donald Trump to cut U.S. trade deficit by $200 Billion by 2020. This was one of Trump’s original requests made by Treasury Secretary Steven Mnuchin during his visit to Beijing last week.
Chinese Vice Premier Liu He made the offer on his return visit to Washington. Last year, United States deficit with China was $375 billion.
According to some experts, like Victor Shih, a professor at the University of California in San Diego, that offer will be hard to implement.
“Even with a drastic reallocation of Chinese imports of energy, raw materials, and airplanes in favor of the U.S., the bilateral trade deficit may reduce by $100 billion,” Shih said. “A $200 billion reduction would mean a drastic reduction in Chinese exports to the U.S. and a dramatic restructuring of the supply chain.”
Another demand Trump administration has made is the opening of China’s market and implementing measures that will deal with the theft of the intellectual property.
“American ownership of its own companies in China must be permitted,” Trump economic adviser Larry Kudlow said. “We are going to have serious talks dealing with a difficult trade situation that needs to be fixed.”
A trade war would hurt both countries and is something both Beijing and Washington are eager to avoid. There is no doubt that this proposal is one of the positive signs that it can be averted.
“By making a significant offer to the U.S. it indicates that China is taking the negotiations very seriously,” Shane Oliver of Sydney’s AMP Capital Investors Ltd said. “Much will depend on the details and time period and later in terms of the implementation.”
President Trump’s last week’s decision to review penalties against Chinese company ZTE is also considered a positive move and something that will go a long way to placate Chinese leadership.