Trump’s Nothingburger Banquet in Beijing

President Trump’s much-heralded trip to Beijing, the first summit in Beijing since 2017, yielded nothing of value. The only good thing about it was that Trump evidently did not give away the store on Taiwan or on exports of sensitive technology.

One concrete thing that President Xi Jinping might have done didn’t happen. Xi could have agreed to put pressure on China’s ally, Iran, to split the difference with Trump and end the war. But neither the official communiqué nor White House leaks said anything about progress on Iran.

The real work, if any, will continue behind the scenes. There have been leaks that China agreed to buy more U.S. oil, agricultural products, and Boeing planes, but that has not been confirmed by the Chinese side.

If China does buy more oil, that will be good for the oil industry and for the balance of trade, but bad for American consumers, since it will increase overall demand and raise gas prices at the pump. As for aircraft, if China does purchase more wide-body planes, Boeing should enjoy the sales while it can.

This is one of the few remaining industries where a U.S. company still dominates, but only temporarily. China’s wide-body long-distance COMAC C929, seating 280 passengers, is expected to enter service within five years, blowing away the Boeing-Airbus duopoly.

The same story is being repeated in industry after industry. China is playing a long game, while Trump is seeking the sugar high of quickie headlines backed by no strategic plan.

Where Xi is advised by real experts on the U.S. who are committed to do what’s best for China, Trump brought with him the likes of Elon Musk and Nvidia CEO Jensen Huang, who are not known for putting the national interest ahead of their own. Huang’s main goal is to get Trump to relent and allow more sales of Nvidia’s advanced chips to China.

Commentators keep pronouncing that China’s economic model is in trouble, brought down by its real estate bubble, or by its excess production capacity. But that doesn’t seem to faze China, which is now leading in industry after industry. The excess capacity leads China to flood the world with cheap exports, destroying domestic manufacturing in country after country.

Some have termed this strategy the “industrial policy of everything.” It has left other nations concluding that China is the next hegemon. Rather than an alliance to compel China to play by the rules, in the vacuum left by the abdication of U.S. leadership, each nation makes its own separate peace with Beijing.

How can China afford the industrial policy of everything? Very simple. It keeps worker wages and consumption well below productivity gains and uses the surplus to invest in its national innovation system and its subsidized exports. In the U.S., consumer spending is about 67 percent of GDP. In China, the figure is just 40 percent, and another 40 percent or so goes to capital investment—far more than any other country.

The U.S. once had a national innovation system, grounded in government-subsidized innovation and domestic production. In the neoliberal era, the U.S. gave its industrial capacity to overseas nations—including China—for the sake of cheaper labor costs, consumer prices, and windfall corporate profits. The Biden administration sought to rebuild some of what we once had, but Biden’s industrial policies were quickly scrapped by Trump.

So we are left with our president going hat in hand to Beijing. Even that posture yielded nothing, other than Xi’s warnings to stop defending Taiwan.