--- title: "Storm Watch: The Case of the Impromptu Trade Mission" description: "Insights on US-China trade negotiations: the complexities, political dynamics, and economic impacts. Discover why trade agreements require deep expertise and long-term commitment beyond political soundbites." image: https://safanad.com/hubfs/8716cf8f-9494-4281-a6f3-0e47eec185c7.png --- [Skip to the main content.](https://safanad.com/news/storm-watch-the-case-of-the-impromptu-trade-mission#main-content) [![Safanad Logo](https://safanad.com/hs-fs/hubfs/Web%20Images/safanad_logo_primary.png?width=991&height=547&name=safanad_logo_primary.png "Safanad Logo")](https://safanad.com) [![Safanad Logo](https://safanad.com/hs-fs/hubfs/Web%20Images/safanad_logo_white.png?width=991&height=547&name=safanad_logo_white.png "Safanad Logo")](https://safanad.com) - [About](https://safanad.com/business) - [Our Business](https://safanad.com/business) - [Our Values](https://safanad.com/values) - [Our Strategy](https://safanad.com/strategy) - [Our Heritage](https://safanad.com/heritage) - [Team](https://safanad.com/board) - [Board of Directors](https://safanad.com/board) - [Our Team](https://safanad.com/team) - [Operating Group](https://safanad.com/operating-group) - [Careers](https://safanad.com/careers) - [Platforms](https://safanad.com/platforms) - [Education](https://safanad.com/education) - [Healthcare](https://safanad.com/healthcare) - [Digital Infrastructure](https://safanad.com/digital-infrastructure) - [Real Estate](https://safanad.com/realestate) - [Safanad KSA](https://safanad.com/safanad-ksa) - [Chief Strategist](https://safanad.com/chief-strategist) - [News](https://safanad.com/news/tag/news) - [Contact](https://safanad.com/contact) [Investor Login](https://services.dataexchange-eu.fiscloudservices.com) Toggle Menu Toggle Menu [Investor Login](https://services.dataexchange-eu.fiscloudservices.com) - [About](https://safanad.com/business) - [Our Business](https://safanad.com/business) - [Our Values](https://safanad.com/values) - [Our Strategy](https://safanad.com/strategy) - [Our Heritage](https://safanad.com/heritage) - [Team](https://safanad.com/board) - [Board of Directors](https://safanad.com/board) - [Our Team](https://safanad.com/team) - [Operating Group](https://safanad.com/operating-group) - [Careers](https://safanad.com/careers) - [Platforms](https://safanad.com/platforms) - [Education](https://safanad.com/education) - [Healthcare](https://safanad.com/healthcare) - [Digital Infrastructure](https://safanad.com/digital-infrastructure) - [Real Estate](https://safanad.com/realestate) - [Safanad KSA](https://safanad.com/safanad-ksa) - [Chief Strategist](https://safanad.com/chief-strategist) - [News](https://safanad.com/news/tag/news) - [Contact](https://safanad.com/contact) [Linkedin](https://www.linkedin.com/company/safanad-inc) 3 min read # Storm Watch: The Case of the Impromptu Trade Mission [![Picture of Dr. John Rutledge](https://safanad.com/hubfs/Team%20Profile%20Pictures/Dr.%20John%20Rutledge.jpeg) Dr. John Rutledge](https://safanad.com/news/author/insights) May 31, 2018, 9:45:00 AM [Insight](https://safanad.com/news/tag/insight) ***Summary****: This piece contains links to a May 4th CNBC Power Lunch discussion of the US trade mission to Beijing. * I have updated the written notes to reflect recent events. [You can watch a clip of the trade mission discussion by clicking here*.*](https://safanad.us9.list-manage.com/track/click?u=ec42ede96decf2388edcfc1f2&id=f182864688&e=fe774947e3)  US/China trade and investment issues are extremely complex. Solving them is a war of siege, not a drive-by shooting. It must be done by people with deep understanding of trade, capital flows, the Chinese economy and intimate knowledge of the Chinese officials, political system and history, not by a small group of high-level officials. ![8716cf8f-9494-4281-a6f3-0e47eec185c7](https://safanad.com/hs-fs/hubfs/8716cf8f-9494-4281-a6f3-0e47eec185c7.png?width=940&height=316&name=8716cf8f-9494-4281-a6f3-0e47eec185c7.png) The US team had arrived in Beijing that morning of the show to push the Chinese to agree on a program to reduce the US/China merchandise trade deficit by $100 billion per year and to resolve a number of technology and investment issues. (Note: In recent speeches, they have raised the number to $200 billion.) The topic was whether I expected the delegation to pull a YUGE rabbit out of a tiny hat. Sorry, no rabbits in that hat. One bad sign was that the night before - while the US team was literally in the air flying to Beijing - China leaked the story they had shut off all purchases of US soybeans. China buys $2 billion of soybeans every month - roughly two of every three beans we grow. Farmers vote Republican. It was a YUGE shot across Trump's bow. Not surprisingly, the meetings were not a love-in. China presented its own list of demands. Nobody agreed on anything. Our team got back on the plane for the 14 hour flight home. Like video games, trade discussions have many levels. You have to know which level you are playing on to achieve your objectives. That takes a long time to learn. **Level 1: Tribal Chest Thumping (TCT). **Pure primal emotions, the psychological trigger when rivalries arise among nations, states, ethnic groups, football fans in different cities.  It is great for campaign rallies and good for selling newspapers. America good! China bad! But it is not a good way to reach trade agreement. Unfortunately, it is the only level of trade analysis that fits into a soundbite so it's the only one most people ever hear. **Level 2: Political. **It is very important to remember that, even when they are abroad, when political leaders make statements they are doing it for the consumption of the folks back home, not as a message to the other side. This is also true of your opponent, of course, so you really have to know them and how their media and political system work before you open your mouth. That requires more air miles, stamps in passports, and years of experience than we brought to the game. **Level 3: Macroeconomics. **Most economists have concluded that trade wars are bad for the economies of both countries. Tariffs, quotas and closed markets make output go down and prices go up. This is where the philosophical conflict on the US team has been most apparent. My old friend Larry Kudlow understands the benefits of trade and the danger of trade wars. Peter Navarro and Wilbur Ross do not. **Level 4: Microeconomics. **This is what trade negotiations are really about. Trade is inherently micro, not macro. Goods and services and securities are bought and sold one person, one product, one company at a time. Protectionist policies can be aimed like laser beams at very narrow segments of the economy - like a certain grade of steel, a specific type of aircraft part or even one kind of bean. The people helped or hurt by those changes make perfect targets for political support. We can see the micro nature of trade in what has happened so far. Trump announced tariffs on steel and aluminum (I love you Pennsylvania). China announced tariffs on 128 specific US products. We responded with TVs, medical devices and batteries and went after Chinese tech companies (Huawei, ZTE, semiconductors.) They stop buying soybeans... **Slow down. Turn off the cameras. **Each tariff makes money for one company or industry and loses money for another. All can be used for political gain. This is where the trade game is played. The problem is, micro agreements at the micro level are not made between leaders before press conferences. They are made in detailed negotiations by middle-level bureaucrats over months and years. There are, of course, legitimate differences and grievances to sort out on both sides, involving important topics like industrial policy (subsidies), attitudes toward intellectual property protection, and the security of various information technology products. We need to work on those issues all day, every day, away from the TV cameras. 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