Trump and Xi’s Narcissism of Small Differences

The presidents of the United States and China are destined to clash, precisely because their economic worldviews are so similar.

By Christopher Balding

U.S. President Donald Trump and Chinese President Xi Jinping in the Great Hall of the People, Beijing on Nov. 9. (Jim Watson/AFP/Getty Images)
U.S. President Donald Trump and Chinese President Xi Jinping in the Great Hall of the People, Beijing on Nov. 9. (Jim Watson/AFP/Getty Images)

President Donald Trump is returning home from an Asian trip during which the United States and China announced agreements worth over $250 billion. This allows Trump, who built much of his political identity on his supposed negotiating prowess and willingness to stand up to China, to return home triumphantly announcing his success at standing up to China.

Perhaps unsurprisingly, this supposed victory is entirely hollow. Most of the largesse comprises ongoing deals or ones unlikely to be executed; even if all of the $250 billion in deals is realized, it will have minimal impact on the structural United States trade deficit and does nothing to address the lack of market access facing foreign firms in China. Trump and Chinese President Xi Jinping carefully avoided any public discussion of more fundamental issues like market access to China by foreign firms.

Xi, who has staked his identity and regime upon projecting China as a great power on the same level as the United States and returning it to global prominence, had broader objectives in mind. In their joint press conference, Xi talked about “promoting coordination and cooperation among major countries” to demonstrate to his domestic audience he treated Trump as an equal.

But his talk about cooperation did little to obscure the underlying conflict between Trump and Xi — a conflict that stems from their fundamental similarities rather than their superficial differences. Trump the brash-talking reality TV star and real estate mogul and Xi the guarded, re-educated party leader seem to share little in common. But they have fundamentally similar geopolitical – and, more specifically, geo-economic — worldviews.

Trump and Xi are both strident nationalists. Trump’s infamous “Make America Great Again” catch phrase strikes the same chord as Xi’s sloganeering promotion “national rejuvenation” or the “Chinese dream.” Both romanticize historical eras when they their countries commanded more respect or power. Their visions of these periods may never have existed or censor out key historical details, but they both want to return to hazy replication of previous glories.

Nationalism informs their other agendas and how they pursue their goals. Flowing from their nationalist mindsets, Trump and Xi view the economic world in mercantilist terms. Trump prioritizes addressing the chronic U.S. trade deficit in the mistaken belief this is a sign of economic weakness and that surpluses equal strength. Xi prioritizes maintaining closed Chinese markets while prying open international markets to drive the trade surplus required by the capital accumulation model of economic growth.

Their latent nationalist mercantilism informs how and what objectives each pursues. Economic negotiations are seen as zero-sum games rather than attempts to expand the range and level of opportunities. Any agreement to open up markets implies a national weakness that may exacerbate the measure of national strength through the trade surplus. This approach narrows opportunity for agreement between countries.

Beyond how Xi and Trump negotiate, mercantilism decides what they will negotiate. Gone are the days of negotiating sweeping, fundamentally revolutionary agreements, with the leaders instead focusing on transactional bargaining that accomplishes no larger goal. In the spring, Trump and Xi announced a 10-point agreement on narrowly focused issues such as U.S. beef exports and Chinese bank investigations in the United States. Described as a “herculean” effort, this agreement contained no larger objectives remaining purely transactional. Market access issues were similarly absent from the recent package of deals. Even China’s announcement that it will allow foreigners to own Chinese banks seems like an attempt to persuade foreigners to bail out an increasingly shaky financial system rather than a principled shift in market access.

Negotiation between the two major global powers focuses on specific transactions rather than advancing broad principles.

This shift bears significant consequences for the state of the bilateral economic relationship.

Despite Trump’s focus on addressing the trade deficit with China, it is simply an impossibility to arrest a $350 billion deficit via individual transactions negotiated by the president. Absent a broader agreement, either on a bilateral basis or, preferably, a multilateral one, transactional negotiation will fail to prevent an expansion of the trade deficit worsening Chinese-U.S. economic relations.

It also further entrenches Chinese interests in an illiberal world order. For all the hand-wringing over Trump’s isolationist rhetoric, the world has feted Chairman Xi’s closing of Chinese markets and nationalist industrial policies. The longer Trump focuses on transactional negotiations rather than principles, the more entrenched illiberal Chinese market practices will take hold and dominate. Perversely, Trump attempting to reduce the U.S.-China trade deficit one transaction at a time is further entrenching the illiberal market practices China holds at home and projects abroad.

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