Trump Regained Leverage Over China by Walking Away from North Korea Deal

Trump, Xi at Mar-a-Lago

The decision by President Donald Trump to walk away from his summit with North Korean leader Kim Jong Un without a deal sent a clear message to China’s President Xi Jinping: the U.S. will stand its ground and reject deals that do not live up to its expectations.

Beijing is Pyongyang’s closest ally and accounts for an overwhelming 90 percent of North Korea’s trade, according to data from the International Monetary Fund. That gives China a lot of influence over North Korea–and a big stake in the outcome of the now failed summit in Vietnam.

Some in the leadership of China’s Communist Party viewed the North Korea summit as a testing ground for U.S. resolve, according to a high ranking U.S. official who spoke on the condition of anonymity. If the U.S. gave a significant amount of ground to the North Koreans in order to score a “win” and strike a deal, it would likely have emboldened China’s negotiators to hold out against what many Chinese officials regard as unreasonable U.S. demands.

The North Korean leader visited Beijing in January, meeting with China’s Xi Jinping even while lower-level U.S. officials were holding trade talks with Chinese counterparts nearby. This was widely seen as an attempt to send a message to Washington that the trade war could interfere with plans to strike a denuclearization with North Korea.

Many American officials believe that Kim’s stance in the Hanoi negotiations was heavily influenced by Xi, which would mean North Korea’s resistance to U.S. demands may have been authorized by China.

Until Trump’s surprise decision to walk away from a deal with Kim, the North Korea negotiations had been seen as giving China leverage in the trade talks.

“If we expect China to cooperate on that important issue, we can’t punch them in the nose on trade issues,” David Dollar, a senior fellow at the Brookings Institution who was the U.S. Treasury’s economic emissary to China during the Obama administration, told Bloomberg News last year. “When you bring in the North Korea factor, it becomes overwhelmingly sensible to make a trade deal with China.”

But with a North Korea deal off the table, at least for now, China has lost that leverage.

And the U.S. has shown that it does indeed have the resolve to resist the temptation to settle for halfway measures or commitments that cannot be adequately enforced or monitored.

Officially, U.S. officials have declined to say that the North Korea summit’s outcome will have any effect on the China trade talks, with some insisting that the two are mostly unrelated. Privately, however, some U.S. officials say that it is likely that the U.S. gained leverage this week.

“This was not the reason we walked in Hanoi but it may be an unlooked-for upside,” one administration official said.

Last week, U.S. officials shut down trade talks in Washington, D.C. after Chinese officials appeared to be unwilling to give ground on key issues. Talks were only restored after U.S. Trade Representative Robert Lighthizer “read the riot act” to Chinese officials, including Vice Premier Liu He, China’s top trade official.

Reportedly, China had been pushing back on U.S. demands to end forced technology transfer and other discriminatory practices. On Thursday, White House economic advisor Larry Kudlow said China had given ground on requirements that U.S. companies partner with Chinese counterparts, a requirement viewed as a key way of facilitating forced technology transfers.


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