Donald Trump and Xi Jinping miss a trick over trade | Jeffrey Frankel

US-Japan agreement on structural reforms in 1990 could be model for current China talks

President Donald Trump has postponed until at least April the supposed deadline for concluding the United States' trade negotiations with China. A good outcome for both sides would be reached if China agreed to protect property rights better and reduce the state's role in its economy; the US agreed to strengthen national saving and public investment; and both sides agreed to reverse their recent tariff increases. Unfortunately, this is not the deal that is likely to materialise.

For starters, Trump fixates on the bilateral US merchandise trade deficit. The Chinese could probably deliver on the verifiable - but worthless - step of committing to buy more US soybeans, natural gas and other commodities. But this would have little or no effect on the overall US trade balance because the US would export less soybeans and natural gas to other countries. Congressional Democrats would rightly point out that the gain was illusory, again highlighting the irrelevance of bilateral trade balances. The more meaningful measure - the overall US trade deficit - widened last year, the predictable result of Trump's budget-busting fiscal policy.

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