Matt Turpin’s posts on Substack are viewed by the cognoscenti as essential reading on China. A fortnight ago, in the wake of Donald Trump’s victory, Mr Turpin opined on the coming phase in the Sino-American relationship/rivalry. Mr Turpin is not someone who minces his words. He believes that it is reasonably clear what will happen:
“In many ways, President-elect Trump is an incumbent and we have a pretty clear picture of his top policy issue: fixing international trade.
For decades, President-elect Trump has been clear that he views trade deficits as the most serious problem facing the United States. He is not hiding this, he is transparent about what he thinks and how he wants to fix it. In his first term, he promised to impose economic costs on countries that have a trade surplus with the United States and he did so despite howls of protest from groups within the United States and in foreign capitals (ally and rival alike).
He views the balance of trade between the United States and another country as the most important issue in bilateral relations. He views allies that maintain a trade surplus, while simultaneously relying on American security guarantees, as particularly onerous. He threatens to withdraw those guarantees to pressure greater defense burden sharing and to reduce trade imbalances.
I think we should expect to see more of that over the next four years.
When it comes to trade deficits, President-elect Trump views the PRC as the worst offender. He views his predecessors attempts to negotiate and persuade Chinese leaders as three decades of unmitigated failure. He believes he has a mandate to fix the trade imbalance with the PRC using all means at his disposal. He doesn’t want a conflict with Beijing or to end Sino-American trade, but he will try to achieve an outcome in which the PRC imports more from the United States, than the United States imports from the PRC. He is likely to enter office in January presuming that Xi Jinping and other Chinese leaders will NOT negotiate in good faith and that only by applying massive economic costs on the PRC will he be able to achieve his objectives in lowering the trade deficit with China.”
Mr Turpin goes on to explain that what Donald Trump has done is transform trade from being a secondary area of policymaking to something that front & centre of how America will seek to control its destiny. Mr Turpin writes: “Unlike previous presidential administrations, international trade is THE top tier policy issue; all other policy issues orbit the sun of trade policy. This was very hard for folks to comprehend during the first term because in other administrations trade policy was a backwater, something the President pays scant attention to. Other administrations, put different topics at the center like human rights, national security, democracy promotion, or domestic policy.
President-elect Trump rejects those alternative framings and places international trade policy at the center.”
A couple of days ago, the President-Elect announced his US Trade Representative: “Jamieson Greer is President-elect Trump’s nominee for U.S. Trade Representative. Greer was an aide in the office during Trump’s first term and will help steer the incoming president’s trade agenda. A graduate of the University of Virginia’s Law School, Greer was chief of staff to Robert Lighthizer, the U.S. Trade Rep during Trump’s first term in office. The goal for the new U.S. Trade Rep will be to focus the office on reigning in the country’s massive trade deficit, defending American manufacturing, agriculture, and services, and opening up export markets everywhere. “Jamieson played a key role during my first term in imposing tariffs on China and others to combat unfair trade practices and replacing the failed NAFTA deal with USMCA,” Trump said. The Hill says the selection came a day after Trump said he would impose new tariffs on goods from Mexico, Canada, and China on his first day in office.”
(Source: https://iowaagribusinessradionetwork.com/trump-selects-nominee-for-u-s-trade-representative/).
In his Substack post, Mr Turpin seems to have anticipated this because he wrote: “The first thing I advise is read Bob Lighthizer’s 2023 book, ‘No Trade Is Free: Changing Course, Taking on China, and Helping America’s Workers’. Lighthizer served as the U.S. Trade Representative during the first Trump Administration and his account provides an insight into President Trump’s worldview during his first term. I don’t think there is any reason to believe that his second term will deviate from that worldview.
In Chapter 3, Lighthizer describes four basic concepts of trade policy which he felt were obvious for much of American history but had been ignored since the end of the first cold war and the creation of the World Trade Organization:
“Number one, don’t allow your geopolitical adversaries to benefit from the U.S. market. Number two, use access to the U.S. market as leverage in trade negotiations. Number three, don’t hesitate to use trade policy as necessary to make the kind of economy you want Americans to have. Number four, act unilaterally when needed.”
My advice is to take out a notecard, write those four concepts down, and when you are confused about what the U.S. Government is doing over the next four years, refer to that card.”
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
