Investing.com -- President Trump is considering a new trade agreement with China, focusing on increasing China’s purchases of American goods and investments in the United States. According to the New York Times (NYSE:NYT), multiple sources close to the president have indicated that while there may be significant challenges in reaching an agreement, the president is keen on a comprehensive deal with Chinese President Xi Jinping that extends beyond just modifying the trading relationship.
The president’s interest lies in a deal that includes substantial investments and commitments from China to buy more American products, despite China’s shortfall in purchasing an additional $200 billion of goods and services under the 2020 agreement. Mr. Trump also wants the agreement to tackle issues such as nuclear weapons security, which he hopes to negotiate directly with Mr. Xi.
In his pursuit of a deal, Mr. Trump has employed a familiar strategy of tariffs and threats. On February 1, he imposed a 10% tariff on all Chinese imports, which he referred to as an "opening salvo," leading to swift retaliation from China. The president has also suggested the possibility of revoking the permanent normal trading relations the United States extended to China over 20 years ago.
However, reaching a deal will require overcoming multiple obstacles, and the Trump administration has not yet decided what it wants from China. Proposals for a meeting between Mr. Xi and Mr. Trump at Mar-a-Lago or Beijing have been discussed, but no official visit has been scheduled yet.
Advisers such as Howard Lutnick, the commerce secretary; Treasury Secretary Scott Bessent; and billionaire Elon Musk have been encouraging the president, telling him he is in a position to strike a significant agreement. The president and his advisers blame the Chinese for not adhering to the terms of the 2020 agreement, and also criticize the Biden administration for failing to enforce it.
In the 2020 agreement, Chinese officials had pledged to open certain markets to foreign companies, better protect technology secrets, and buy American crops and energy. However, they fell short of meeting the purchasing targets, citing the Covid pandemic as the reason.
Chinese officials and think tank experts have been working on a proposal to attract Mr. Trump’s interest. One Chinese offer might include investments in the United States that would create an estimated half a million jobs in industries like solar, electric vehicles, and batteries. The proposal could also include significant Chinese purchases of American exports, cooperation on maintaining peace with North Korea and rebuilding Ukraine, and promises to maintain the dollar as the pre-eminent global currency.
Mr. Bessent and Mr. Lutnick, who may lead any negotiations with China, are considering proposals that they believe could rebalance trade. This includes significant Chinese investments in the United States, substantial purchases of U.S. crops, airplanes, and other goods, and possibly an arrangement to address Chinese manufacturing overcapacity.
However, the idea of welcoming Chinese factory investments in the United States could be divisive within the Trump administration, as several officials see Chinese investment as a security threat. Federal and state governments, as well as Congress, have also taken a stricter stance on Chinese purchases of technology companies and real estate in recent years.
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