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Trump just got friendlier toward China

Talk versus action: It’s always important to distinguish between the two–especially with incoming president Donald Trump, a master of using hyperbole to get what he wants.

Trump bashed China during the presidential campaign, and since winning the election on Nov. 8, he has continued to say he’ll impose sanctions on China if it doesn’t agree to more favorable trade terms. But those are mere words, and Trump just made an actual decision involving China that undercuts many of his threats.

Trump has nominated Iowa Gov. Terry Branstad to be his ambassador to China, and by extension, point man for any new negotiations involving trade. CEOs who have been worried abut possible trade wars with China ought to cheer, because Branstad is steeped in the importance of trade and the ways it benefits Americans.

Branstad has personally known Chinese president Xi Jinping since the 1980s, when the two men met through a cultural exchange. They have stayed in touch, with Xi visiting Iowa and Branstad being Xi’s guest in China. A Chinese foreign ministry spokesman called Brandstad an “old friend” of China when the Trump news broke.

But more important than Brandstad’s personal connections in China is his understanding of the importance of trade. Exports account for 12% of Iowa’s economic output and 22% of its jobs, according to the Asia Society. China is the state’s third-largest trading partner, after Canada and Mexico. Corn is Iowa’s biggest export, followed by tractors, other agricultural products and aircraft parts.

Trump has said he’ll impose tariffs of 35% or more on Chinese imports if China doesn’t agree to trade reforms that, so far, Trump hasn’t specified. Many trade experts feel China and other economic partners would retaliate with like measures if Trump tries to punish China. That kind of tit-for-tat would raise the cost of products imported from China, and reduce sales of American products to China.

Branstad, as ambassador, would be the field general executing the orders of his boss in the White House. Trade tensions would harm farmers and businesses in Brandstad’s home state. That doesn’t mean it won’t happen, but it means a key player would have to answer to real people he knows who would be harmed by tariffs and other punitive measures. While meant to punish China, they’d also punish some ordinary Americans.

Many analysts consider Trump’s rhetorical excesses unhinged or mercurial. But a kind of logic is emerging. Trump makes threats as an opening negotiating bid. Then he settles for less. He bashed Carrier, for instance, for its plan to move 2,000 jobs from Indiana to Mexico, then declared victory when he persuaded the company to keep half those jobs in the United States.

It’s not hard to discern a similar pattern in Trump’s approach toward China. His opening bid is a disruption of the status quo and the possibility of trade restrictions that could undermine the rapid economic growth China needs. He broke with decades of diplomatic protocol by having a breezy chat with the president of Taiwan, thumbing his nose at China’s insistence that the democratic island nation is really a Chinese province.

Yet the man appointed to execute Trump’s actual policy is a free trader who understands and respects Chinese sensibilities, and has benefited himself from open borders. Branstad is the good cop while Trump himself is the bad. The ambassador’s main job will probably be finding a way for Trump to claim a win on trade, while leaving mostly everything else alone.

Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman.

 

 

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