China Visit, Brexit Could Impact Utah’s Export Economy
Salt Lake City—President Donald Trump’s upcoming visit with China’s president this week could have ripples to Utah’s thriving export economy.
Trump will be having his first meeting with President Xi Jinping Thursday and Friday at the Mar-A-Lago resort in Florida. Because this is only an initial meeting, policy announcements aren’t expected to be made, but how the visit goes could inform future negotiations, said Derek Miller, president and CEO of World Trade Center Utah.
“There are probably not a lot of concrete decisions that will be made in this initial meeting, probably not a lot of announcements that will be made, but what’s really important is the tone of the meeting because it will set the tone between the U.S. and China going forward,” Miller said.
Beyond tone, two other things to watch in Trump’s visit with Xi are discussions on trade and treasury notes.
The U.S. and China are the two largest economies in the world, and closer to home, China and Hong Kong are Utah’s biggest export partners. Trump prefers unilateral trade agreements with specific countries rather than large, multi-nation trade deals, Miller said, and has expressed displeasure with how trade between the two economic giants is handled.
“Trump has made his comments about the fact that he doesn’t like this trade imbalance, that he thinks that China is manipulating that by manipulating its currency and taking jobs from the U.S. and using low-cost labor to produce things cheaper in China, so I’m sure those will all be things they talk about in this meeting,” Miller said.
China is also a big owner of U.S. treasury notes, Miller said, which the U.S. sells in order to borrow money to finance ongoing operations.
“China is, of course, one of the largest purchasers of those treasury notes, so they have a lot of leverage as it relates to financing or debt, so you can imagine that needs to be considered, as well,” Miller said. “I don’t know that they’ll talk about that specifically, but whenever you’re in a negotiation, you need to think about what points the opposing side has, and that’s a big one.”
Regardless of the conversation the two world leaders have, he said, their contrasting natures alone will make the visit a fascinating one.
“It’s made even more interesting to watch this because on one hand, to watch President Xi Jinping, you have a very formal man—he’s always on script, well-scripted and stays on script—and on the other hand, you have President Trump who never stays on script, if there was even a script to begin with. That’s the power of both of their personalities, but they’re very different personalities,” Miller said.
Two other recent events also will have repercussions for Utah’s export trade, including Britain’s formal notice to begin its exit from the European Union on March 29. After China, Britain is Utah’s largest export partner, Miller said. Fortunately, he said, the country seems to be breaking from its continental cousins thoughtfully—right after the vote, an envoy came to Utah to assure export partners the country was still eager to trade with them—and has taken precautions to protect its trade deals through the split.
“It’s important to remember it’s just the beginning of the process now—there are a lot of details to be worked out—but it gives them two years for Britain to leave the EU. I’m confident that in those two years Britain will be able to work those things out with the EU. For one thing, they’ve already begun,” Miller said. “This is an island nation. They recognize they do not exist, their economy certainly doesn’t exist, except that they’re trading with the world. … Trade is vital to their economy. I think the Brexit vote is an indication they were tired of sending a lot of money to bureaucracy in Brussels and in return they were told what they could and could not do, and that didn’t sit well with a lot of people in Britain.”
The other consequential event is an executive order signed by Trump on March 30 regarding enforcement of trade agreement rules, Miller said. Trade rule agreement was something Ronald Raegan fought for during his presidency, as well as an issue Trump discussed on the campaign trail, he said. Enforcement would include cracking down on countries trying to skirt the rules or otherwise bend or break them to better their profits in exporting and importing, Miller said, such as China glutting the market with steel as a purposeful effort to drive down the price of the commodity. Such enforcement benefits trade not only in ensuring fair practices are in play, but also in giving other companies confidence to take their business internationally, he said.
“Rules are only helpful to the degree that they’re enforced. It’s nice to talk about free trade, but it has to be fair trade, and certainly one of the fundamental parts of free trade is if you’re going to have rules you’re going to have to abide by them and have some consequences for breaking them,” Miller said. “I think not only will it have the impact of having trade be more fair and send the message to foreign companies and countries that the U.S. will be paying attention to this, but it’s good for trade overall to send the message that rules will be enforced. [Companies] will want to get into the game. You don’t want to get into the game if the cost of bad dealing is going to be higher than the benefit. If we can get rid of the cost of bad dealing and level the playing field, I’m sure we’ll get more companies involved in the international trading business.”