Clearly, the U.S. cannot narrow its trade gap with Asia without a major re-balancing of its trade relationship with China.How can that be done?
Staying with trade policy, the only thing Washington can do is (a) make sure that American firms have a fair access to Chinese markets for goods and services, and (b) that China abides by the World Trade Organization (WTO) rules in its export sales to the U.S.
The problem of the growing Sino-American trade imbalance has been a long time in the making. It started with wholesale outsourcing of American manufacturers attracted by low production costs (high profit margins), China's large domestic market and a springboard for competitive exports of things "made in China." In the process, U.S. firms did not just outsource; they also agreed to technology transfers to their joint-venture partners as a condition for producing in China.
(Read more: China wonders: Why do we own so much U.S. debt?)
No wonder we now have a situation where Apple, America's most valuable company, produces its world beating "i" products in China; or that Wal-Mart, the world's largest retailer, imports $30 billion worth of goods from China to sell in the United States.
And then, think of the fact that China's current account surplus, estimated to hit $420 billion by the end of this year, has to be recycled through China's investments overseas.
The latest news is that China's state-owned Dongfeng Motors is about to buy 30 percent of PSA Peugeot-Citroen (PSA), Europe's second-largest car maker, for an estimated $1.2 billion euros. China's late Paramount Leader Deng Xiaoping must be smiling somewhere. As a young man, Mr. Deng worked in the 1920s as a fitter in a French automobile factory while on a four-year work-study program in France.
This deal obviously has the blessings of Paris and Beijing, and is part of PSA's efforts to expand its presence in Chinese market.
(Read more: Asia still at risk from quantitative easing: Nomura)
The political blessing is important, not so much because in this particular operation the French government will also take 20 percent of PSA, but because it shows a diplomacy at work to buttress trade and investment ties with China.The message is clear: the U.S. has to find an appropriate modus vivendi with China.
Referring to what happened during last week's Asian summits, Washington cannot expect to build a more advantageous trade relationship with China while pursuing a confrontational posture and pushing a trade agreement (TPP) viewed in East Asia as an instrument of countering Beijing's growing economic and political ties with its neighbors.
Most East Asians consider that a "mission impossible" and a game they don't want to play – with the exception of a few countries using the U.S. in their territorial disputes with China.
Follow the author on Twitter @msiglobal9
Michael Ivanovitch is president of MSI Global, a New York-based economic research company. He also served as a senior economist at the OECD in Paris, international economist at the Federal Reserve Bank of New York and taught economics at Columbia.