CHINA’S ECONOMIC LIFELINE: Gina Raimondo is expected to arrive in China this week amid the country’s worsening financial crisis and as the White House seeks to revive high-level communication between the world’s largest economies. The Commerce secretary is at the forefront of the Biden administration’s efforts to curb China’s access to advanced technology, and her arrival comes as Beijing faces plunging exports and foreign investments, and soaring youth unemployment. The commerce department has kept tight-lipped about the highly-anticipated trip, and has not officially confirmed the schedule. The Chinese embassy said Thursday it would welcome Raimondo, but warned that Beijing is considering retaliating against a White House order to restrict American investment into advanced technology sectors in China. Beijing’s financial woes could tee up leverage for Washington upon her arrival. But Raimondo can also expect added pressure in talks with Chinese officials to ease long-standing trade restrictions, which the Biden administration categorizes as part of a “de-risking” strategy to restrict China’s access to technology that could fuel the country’s military. Raimondo’s task list for her meetings with her Chinese counterparts will likely include the perennial issue of market access restrictions against American companies and the recent spate of Chinese police raids on the Beijing-based operations of U.S. firms including Mintz and Bain & Company, per Doug Palmer and Phelim Kine. Officials could also discuss opening up more sectors for foreign investors between China and Washington, even as the U.S. moves to restrict trade in a narrow set of advanced technology sectors. Not all about Beijing: The IMF warned in a July report that China’s underperforming reopening from the pandemic was dragging down the global economic recovery. "China's slowdown will have the largest impact on its Asian neighbors, but there will be some spillovers to the United States," added Treasury Secretary Janet Yellen, per Bloomberg. Raimondo’s visit plays a dual role. The Commerce secretary’s Bureau of Industry and Security is responsible for administering export controls aimed at hobbling China’s access to advanced technology that could fuel the country's military. But Raimondo is also hoping to expand the export of American goods to China, which remains Washington’s third largest export market. That pits Raimondo against Republican hawks on the Hill, who will be closely watching the visit. A coalition of Republicans including Mike Gallagher, who chairs the House Select Committee on China, sent a letter that said “decisions on the nature and scope of U.S. export controls should be taken in Washington, not Beijing.” Other lawmakers wonder if the trip is worth the effort given scant returns from other senior officials recently in the country, including Yellen, Secretary of State Antony Blinken and U.S. climate envoy John Kerry. “We cannot keep sending senior administration officials to Beijing when they continue to only respond with provocation and hostility,” said House Foreign Affairs Chair Michael McCaul (R-Texas). MEXICAN TARIFFS SIGNAL ALIGNMENT ON CHINA: USTR praised the decision by the Mexican government to expand tariffs on imports of steel from nations that don’t share a free trade agreement with the country, and said Washington “welcomes Mexico’s efforts to address global non-market excess capacity in the steel sector.” Sam Michel, a USTR spokesperson, said in a statement on Friday that the U.S. “looks forward to continuing discussions with Mexico to address the recent surge of imports of steel and aluminum products into the United States and to ensure greater transparency with regards to Mexico’s steel and aluminum imports from third countries.” Mexico’s decision is a thorn in the side of China, as well as South Korea and India, which are some of Mexico’s most important trading partners, but are not among the more than 50 countries with which Mexico maintains some version of a free trade agreement. Jorge Guajardo, a partner at Dentons Global Advisors and Mexico’s former ambassador to China, told Morning Trade that “it’s an easy position to take against China. It scores political points in the United States, while being neutral-to-positively received in Mexico.” The rundown: Mexico will raise temporary tariffs on nations that don't share a free trade agreement with the country from 15 percent to 25 percent on items related to the steel industry. Mexico is also expanding tariffs on a wider range of products, including rubber, glass, electronics, textiles and auto parts, and said the restrictions are critical “in order to avoid the affectation of production chains and to maintain competitiveness” in key sectors. The decree ends its validity on July 31, 2025, the document notes. TAIWAN TALKS IN FOCUS: The U.S. and Taiwan launched their second round of negotiations under the U.S.-Taiwan Initiative on 21st Century Trade signed this year, and held days of in-person discussions on agriculture, labor and the environment. The two sides held talks between Monday and Friday of last week, USTR said in a statement on Friday, which added that “conversations were productive and officials will continue to hold discussions in the months ahead in order to reach consensus.” The trade negotiations were kept under wraps until after their conclusion, partly over concerns about generating a strong reaction from China, per The Wall Street Journal. Taiwan’s office of Trade Negotiations said in a separate press release that officials discussed ways to enhance cooperation over food security, ensure labor rights are in line with international standards and ways to step up joint conservation efforts, per Focus Taiwan. The negotiations coincided with a stopover from Taiwan’s Vice President William Lai, first in New York and then San Francisco, on his way to and from Paraguay. China launched military drills in a typical show of discontent over Washington’s engagement with the island. CAMP DAVID DELIVERABLES: President Joe Biden wrapped up a trilateral summit with the leaders of Japan and South Korea on Friday with a joint statement vowing cooperation in the face of rising security threats from China and North Korea. The trilateral leaders agreed to pilot a supply chain early-warning system to ensure the global flow of products, including critical minerals. China currently controls more than half of the world’s production of rare earth minerals including lithium, cobalt and manganese. The summit’s joint statement explicitly highlighted Beijing’s “dangerous and aggressive behavior supporting unlawful maritime claims” in the South China Sea, a firm rebuke of the country’s territorial claims. Looking ahead: Biden responded to a shouted question after his meeting with the two leaders on Friday, saying he still expects to meet with Chinese leader Xi Jinping at the Asia-Pacific Economic Cooperation forum in November. XI JINPING SET FOR BRICS: China’s paramount leader Xi Jinping will attend the BRICS leaders summit, and will make a state visit to South Africa today through Thursday, foreign ministry spokeswoman Hua Chunying said in a statement. The five nations of Brazil, Russia, India, China and South Africa are poised to discuss ways to better exploit the bloc’s New Development Bank and country admission criteria, as China seeks to expand its geopolitical heft by eventually adding enough new members to rival Western-led blocs like NATO. IPEF ON TAP FOR TAI: USTR Katherine Tai is in Indonesia and India until Saturday, for meetings with G-20 trade and investment ministers to discuss enhancing multilateral engagement, her office said in a statement on Friday. The rundown: Today, Tai is in Semarang, Indonesia, and will take part in the East Asia Summit Economic Ministers’ Meeting. Tai will then travel to India and meet with European Commission Executive Vice President, Valdis Dombrovskis, as well as France’s Minister for Foreign Trade, Olivier Becht on Wednesday, per USTR's weekly guidance. Some context: The trip comes as the Biden administration moves forward with its signature Indo-Pacific Economic Framework, which is aimed at enhancing regional integration to counter the rising threat of China. Both Indonesia and India are among the 14 countries participating in IPEF talks, which is expected to hold its fifth negotiating round in Thailand next month.
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