The First 100 Days

1/4/2017
26. Rebalance US – China Relations
Rising US – China Trade Deficit
US Balance of Trade with China
($, Bn)
0
-100
-200
-300
2001: China
joins WTO
Trump China
Policy Considerations
More Likely Policy Actions:
• Designate China a “currency manipulator” (even if
criteria questionable)
• Initiate WTO trade cases (anti-dumping, IP,
subsidies)
• Intensified Sino-US competition (Asia & globally)
-400
$366 Bn
1985 1995 2005 2015
VNM
4%
MEX
8%
US Trade Deficit Breakdown
In absolute terms
Other
19%
JPN
9% DEU
10%
CHN
50%
On a value-added basis
ITA
4%
IRL
4%
MYS
4%
VNM
5%
TWN
7%
Others
19%
MEX
8%
CHN
16%
JPN
13%
DEU
11%
KOR
9%
• Tighter investment restrictions on China in the
US (via the Committee on Foreign Investment in the
US – CFIUS)
Less Likely, but Possible:
• Impose tariffs of 15% for 150 days (1974 Trade Act,
Sec 122)
• Raise tariffs outside WTO procedures (1974 Trade
Act, Sec 301)
• “National security”-based economic actions
• Significant increase in US Asia-Pacific military
“presence”
You May Not Know: The US last labeled China a currency manipulator in 1994. We think it is very possible that Trump will do so
in his first 100 days (even if criteria not technically met). Doing so is largely symbolic, and triggers a lengthy, multi-step
negotiation. By comparison, WTO cases or punitive tariffs are more likely to garner retaliatory actions from China (countervailing
tariffs, order cancelations, investment restrictions, CNY devaluation, UST sales, civil and criminal cases).
Deutsche Bank
Source: BMI. DB Global Markets Research (Zhang, Kojodjojo). BMI Research. Baker McKenzie. Scowcroft Group.
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