Trump Warns Xi That “Disappointing” Surge In China Trade Deficit Is “Not Sustainable”

President Trump and China’s President Xi Jinping, held a call yesterday, according to the White House.

While President Trump “expressed hope” that the resumed inter-Korean dialogue may prompt a change in North Korea’s destructive behavior, perhaps more notable was the fact that President Trump used the call “express disappointment that the United States’ trade deficit with China has continued to grow” and made clear that “the situation is not sustainable.”

Indeed – China’s Trade Surplus with the US grew notably in Trump’s first year…

The full readout is below:

President Donald J. Trump spoke yesterday with President Xi Jinping of the People’s Republic of China to discuss recent developments on the Korean Peninsula.

President Trump and President Xi acknowledged the resumption of inter-Korean dialogue and expressed hope that it might prompt a change in North Korea’s destructive behavior.

President Trump committed to sustain the United States-led global campaign of maximum pressure to compel North Korea to commit to denuclearization.

The two leaders also discussed trade issues, and President Trump expressed disappointment that the United States’ trade deficit with China has continued to grow. President Trump made clear that the situation is not sustainable.

It is unclear just what Trump will do about it but as we noted previously, it seems China is deeply worried about US trade sanctions, and more broadly the US taking  more assertive in rectifying perceived issues in the bilateral trade relations. Every Administration goes through an episode of promising to deal with Chinese trade interventions and ends up with a watered down, vague agreement. China’s pre-emptive action (with its Treasury purchase headlines) suggests that this time the level of worry is different.

Of course this week also reportedly sees the launch of the Petro-Yuan futures contract.