Donald Trump’s First Summit with President Xi Jinping of China

By the CSIS Asia Team: Victor Cha, Bonnie Glaser, Matthew P. Goodman, Michael J. Green, Christopher K. Johnson, and Scott Kennedy | April 3, 2017 on CSIS.org

Background

President Donald Trump will host President Xi Jinping of China at Mar-a-Lago on April 6–7. This will be the first opportunity for the two leaders to take the measure of the other in person and hopefully establish some sort of personal rapport. The White House has announced that they will discuss global, regional, and bilateral issues of mutual concern, with a particular focus on the North Korean nuclear problem and the steady increase in bilateral economic and trade friction. In addition, the president and first lady will also host President Xi and Madame Peng Liyuan at a dinner on the evening of April 6. Unlike Prime Minister Abe of Japan, President Xi will not stay at Mar-a-Lago but instead will spend the night at the Eau Palm Beach Resort and Spa in Manalapan.

Q1: How are Trump and Xi approaching this summit?

A1: U.S.-China relations became increasingly testy over the course of the Obama administration. Donald Trump raised the heat with steady criticism of China throughout his presidential campaign. In early December, Trump further raised Beijing’s hackles when he spoke with President Tsai Ing-wen of Taiwan and subsequently questioned why the United States had to be bound by the four-decades-old “One China Policy,” under which Washington recognizes the People’s Republic of China (PRC) as the sole, legitimate government of China, yet only acknowledges Beijing’s claim to sovereignty over Taiwan. The president then tempered his position in a phone call with Xi on February 10, reaffirming that he would, in fact, be guided by the One China policy. Then within hours of the March 30 White House announcement of the summit, Trump tweeted that his meeting with Xi would be “very difficult” because of China’s economic policies and threat to U.S. jobs.

President Trump plans to convey to Xi Jinping his perspectives on the problems in the U.S.-China relationship and what is necessary to resolve them. If Xi agrees with Trump’s framing of the problems and agrees to address them together, then the summit may yield a shared resolve to work jointly to strengthen bilateral ties. However, if Xi disagrees with Trump’s portrayal of the priorities and the actions that need to be taken to address outstanding problems, bilateral friction is likely to grow as the Trump administration takes unilateral measures to deal with trade, North Korea, and the South China Sea.

President Xi has generally offered tempered responses to this harder line on China. In fact, it is fair to say that Xi’s exceptionally strong political position at home likely explains why China, at least thus far, has not reacted much more actively to President Trump’s flirting with changes to elements of the relationship that Beijing views as utterly sacrosanct. With critical changes to the leadership expected in this fall’s 19th Chinese Communist Party Congress, Xi cannot afford a distracting confrontation with the United States. Moreover, Beijing has already achieved one objective by securing a meeting at Mar-a-Lago, where the Trumps gave a lavish welcome to Prime Minister Abe and his wife in February. In these early summits, Chinese leaders typically prefer joint announcements on the broad principles that will govern bilateral relations, seeking to reassure audiences at home and limit the U.S. side’s freedom of maneuver going forward. It is not evident, however, that the Trump administration is either ready or inclined to this approach, particularly given the president’s tweet about the summit.

Q2: Why would Xi risk a summit meeting now?

A2: There are four main reasons. First, Xi is pushing an aggressive agenda for the 19th Party Congress and has carefully choreographed a calendar of events in the run-up to the conclave to highlight his position as China’s undisputed supreme leader. These include a major conference on his signature “One Belt, One Road” initiative in May, a grand military parade showcasing his command of the People’s Liberation Army (PLA) on that institution’s 90th birthday in August, and an effort to revivify the BRICS forum in the fall. Against that backdrop, the meeting with President Trump represents the first link in an unbroken chain of events meant to burnish Xi’s leadership credentials.

Moreover, Xi must demonstrate that he can properly manage China’s most important bilateral relationship, especially given the testy tone of the two countries’ interactions so far under the Trump administration. This is particularly true following Xi’s ascension to “core leader” status at a party plenum last October. Regime propaganda celebrating Xi’s installment as “the core” cited two main justifications for conferring this elevated status upon him — the turbulent international environment facing China and his several “accomplishments” since arriving on the scene as party chief. Consequently, Xi needs to demonstrate his skillful management of relations with Washington to forestall any critiques from political rivals desperate to find an angle for leverage in shaping the new leadership lineup at the Party Congress.

Second, Xi’s standing as a “princeling” scion of one of the founding fathers of the regime imbues him with a unique sense of confidence that manifests itself in a greater comfort level with risk taking than his predecessors. Xi presumably calculates that he is the more seasoned and tested leader in the upcoming meeting, a judgment likely reinforced by what he perceives as his success in forcing a climbdown by the president on the “One China” spat. Third, Xi is eager to continue the process — begun during his many engagements with President Obama — of educating U.S. leaders that China now is claiming its rightful place on the international stage as a great power and that, as such, it no longer has to yield to U.S. pressure on a full range of issues, and, when pressed, can push back in ways that cause real pain for U.S. interests.

Finally, and perhaps most importantly, Xi presumably wants to secure some kind of promise from the president that the two countries will avoid a trade war. Chinese officials are concerned about the agenda of many of the administration’s point men on trade, and Xi likely wants to win such an agreement before those individuals are fully settled in office. China’s economy is performing well so far this year, giving the leadership space to crack down on “financial risks,” including bad debt, risky wealth management products, and so on. As such, China is more dependent on exports to deliver growth this year than has recently been the case. Given that Trump’s key trade advisers have placed an emphasis on “defensive” trade tactics — keeping foreign goods out of the United States — they pose a threat to Beijing’s calculus that has to be contained, especially in a party congress year.

Q3: What will Trump expect from Xi on North Korea?

A3: North Korea’s rapidly growing nuclear and missile capability and the likelihood that it will soon be able to launch a nuclear-tipped intercontinental ballistic missile (ICBM) that could reach the United States has been identified by the Trump administration as the most urgent security matter for the Xi-Trump summit. Two weeks ago, President Trump tweeted that “North Korea is behaving very badly,” adding, “They have been ‘playing’ the United States for years. China has done little to help.” The Trump administration has undertaken a policy review to determine how to respond to the growing nuclear and missile threat posed by North Korea. While diplomatic and military options have not been ruled out, early efforts are focusing on encouraging China to increase pressure on North Korea with sanctions through: 1) Encouraging China to go beyond the 2017 coal import ban in titrating other economic interaction with the North; 2) Cutting off North Korea’s access to the international financial system, which requires Chinese actions to halt financial transactions through Chinese banks and front companies; and 3) Cracking down on Chinese nationals who evade UN Security Council resolutions regarding business in dual-use items or dollar-denominated transactions with the Democratic People’s Republic of Korea (DPRK). Secretary of State Rex Tillerson previewed the Trump administration’s expectations for such Chinese actions during his mid-March meetings in Beijing, including with President Xi.

If China refuses to shut down business between its entities and North Korea, the Trump administration could implement “secondary sanctions” that would make it difficult for those entities to deal in U.S. dollars, but such measures may not be effective due to the limited exposure of small Chinese banks and front companies to the U.S. banking system. Xi Jinping will likely seek to avert a crisis with the Trump administration over North Korea by expressing willingness to put more pressure on Pyongyang, which China increasingly sees as a source of regional instability. However, Chinese interests in preserving stability in North Korea remain unchanged, so Beijing’s pressure will be limited and perhaps short-lived.

Q4: What other security issues will be discussed?

A4: The South China Sea will likely also be on the Trump-Xi agenda, although it is considered by both China and the United States to be less urgent than North Korea and, as such, is likely to get less attention in the leaders’ discussion. President Trump will probably emphasize the importance of preserving freedom of navigation and overflight. He may also strongly urge Xi Jinping to rely on diplomacy to manage the South China Sea disputes and halt efforts toward militarization. Xi Jinping is likely to clearly reiterate China’s indisputable sovereignty over the disputed islands, while also emphasizing China’s peaceful intentions without pledging to forego future moves. Having completed construction and militarization plans on its seven newly built islands in the Spratlys and announced its willingness to conclude a framework Code of Conduct with the Association of Southeast Asian Nations (ASEAN) in 2017, Beijing is not likely planning to dredge another island or declare a South China Sea Air Defense Identification Zone this year. No concrete progress will emerge from the summit on the South China Sea. U.S.-China friction will probably increase if the Trump administration decides to conduct more assertive freedom-of-navigation operations (FONOPS) than the Obama administration did. If Xi Jinping approves deployments of military aircraft to Fiery Cross, Subi, and Mischief Reefs along with PLA Navy operations from the new deep water ports at those land features, the Trump administration will be faced with a major challenge.

Xi Jinping will almost certainly raise his concerns about Taiwan, especially President Tsai Ing-wen’s refusal to accept that Taiwan and Mainland China belong to one country. At a minimum, Xi will want President Trump to reiterate his commitment to honor the U.S. “One China” policy. He may also press Trump to end arms sales to Taiwan and declare that the United States views Taiwan as part of China, but doing so would be risky since such appeals could anger Trump and undermine Xi’s larger goal of setting a positive tone and securing a stable and positive U.S.-China relationship.

Q5: Will there be a collision over economic issues?

A5: There will certainly be an airing of complaints, by both Trump and Xi, but it is unlikely that either side will make specific threats or that they will engage in substantive negotiations. Trump’s criticism begins with the large bilateral trade deficit, which stood at $347 billion in 2016. For him, this is a symptom of Chinese mercantilism — super-charged industrial policies, barriers to imports and foreign investment, and intellectual property theft. He likely will contrast the obstacles U.S. products face in China with a more open U.S. market and provide some examples that reveal the lack of reciprocity.

President Xi will likely make four points. He will first try to explain how U.S.-China relations have been mutually beneficial and that the trade deficit does not capture this reality. Second, he will emphasize that he is an economic reformer but that patience is needed because he is facing substantial opposition from local governments and state-owned enterprises. Third, he will suggest additional ways to expand cooperation and create more U.S. jobs by concluding a bilateral investment treaty, allowing greater Chinese investment in U.S. infrastructure, having U.S. companies participate in China’s “Belt & Road” investment initiative in Asia, and loosening controls of U.S. exports of high-tech products. And finally, he will warn that China is fully prepared to respond to U.S. actions by challenging them at the World Trade Organization (WTO) and retaliating with its own penalties, which include the WTO cases China has already initiated against the United States and European Union for continuing to treat China as a nonmarket economy.

President Trump is likely to press Xi to recognize that the economic relationship has become unbalanced and make a general pledge to adjust Chinese policies. But he may not go further because his administration is still building its case against China. The Commerce Department recently initiated a review of its conclusion that China is a nonmarket economy, and late last week the president signed two executive orders on trade, one of which requires the Commerce Department and Office of the U.S. Trade Representative (USTR) to present him with a report in 90 days about the causes of large U.S. trade deficits, including with China. The Treasury Department semiannual report that identifies currency manipulators is not due until April 15. Finally, President Trump’s nominee for USTR, Robert Lighthizer, has yet to be confirmed; a vote on his nomination may not occur until early May. Lighthizer will need to assume his position before the administration can move forward in any systematic way in attacking what they view as unfair trade practices and negotiating new deals.

President Xi may believe he can take advantage of Trump’s limited experience and incomplete staff to box Trump in and get him to pledge not to start a trade war, but Trump would prefer for Xi to admit that there is a problem that requires changes in China’s approach in how it governs its economy and trade. The most likely outcome is a stalemate, with no firm agreements and with Xi heading home anxious about what may come next.

Critical Questions is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

© 2017 by the Center for Strategic and International Studies. All rights reserved.

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