China Dodged a Bullet With U.S. Report on Yuan
Wendy Cutler, ASPI VP and former U.S. Trade Negotiator, talks with Bloomberg
Following is the transcript of a television interview that Wendy Cutler gave to Bloomberg Daybreak: Australia
Bloomberg: How positive is it that the Treasury refrained from naming China a currency manipulator?
Wendy Cutler: Well, I don't think there's any surprise here. I don't think anyone expected China to be named, particularly given the strict criteria in the statute for naming any country - but that doesn't mean there's no trade tensions between the U.S. and China. So in some ways China dodged a bullet with this report. The treasury did make it clear that they're going to closely monitor China's currency practices. But there's a lot of other tension in this relationship.
Bloomberg: Yeah, exactly. To your point of other tensions in that relationship, just today, we heard that the Trump Administration could be pulling out of that 144-year-old postal treaty that gives certain advantage to Chinese businesses. This seems to be the strategy of the Trump Administration: You let up pressure on one area, but then you keep being on the attack, and attacking China on other economic fronts. How successful has this been so far?
Wendy Cutler: Well, I mean the Trump Administration has been successful with this approach to some degree. I think this postal treaty - if you look at it and you look at the concerns of the U.S. manufacturers being disadvantaged by the low rates given to China, I think it looks like a treaty that needs to be updated, and that the rates that China gets under this postal agreement are more aligned with the size of its economy.
Bloomberg: Wendy, do you think the fact that there was some restraint in naming China as a currency manipulator? Notwithstanding the fact that it clearly didn't meet the technical framework and criteria, they could've probably still used that as a bit of a political shot.
Wendy Cutler: Yeah, once again, I'm not surprised. I mean, these reports have been undertaken now for a few years, and no one's ever been named under them. But once again, China will be monitored closely, so they're not off the hook.
Bloomberg: What happens after the midterms? If there is a resounding democratic victory, does it change the Administration's stance on trade on China at all?
Wendy Cutler: I don't think the midterm has that much to do with the U.S.-China relationship. I think there's just a broad bipartisan concern about the unfair trading practices of China. I think what will be interesting is after the midterm election, Presidents Trump and Xi are scheduled to meet on the margins of the G20 meeting, and all eyes will be looking at that meeting to see if somehow they can get things moving in a more constructive path. I don't expect any breakthroughs in that meeting, but maybe the two sides can announce that they will at least get back to the table, and try and work through some of these issues, and maybe even agree to a moratorium on further tariff increases.
Bloomberg: And that was going to be my next question, because of course we're right now at very high levels of tariffs, but still not quite there. That would be on January 1st. This GTV chart for our Bloomberg subscribers, just showing the 250 billion dollars of Chinese goods that have been under new tariffs by the Trump Administration. The yellow line is the 200 billion dollar figure right there, and of course the red line at the top would be if President Trump did go ahead with all of the tariffs that he's already threatened. So if you don't get a breakthrough at the G20, does this mean that given the political schedule in DC as well, it will be inevitable that you go to doubling tariffs on January 1st?
Wendy Cutler: Well, I think if there's not some kind of agreement on a path forward during that meeting, there's not going to be another high level opportunity before January 1 when the 200 billion dollars worth of tariffs are supposed to increase to 25 percent. And so if those tariffs go to 25 percent, more and more consumers are going to start to really feel these tariff increases. Up until now, many of the tariffs have affected businesses more, because the tariffs have been put on inputs into products. But this list of 200 billion dollars starts hitting many consumer products, and that further list of 267 billion dollars basically hits all Chinese imports.