A big trade deal 'unlikely to happen' with Trump's team in China: Former government official

Key Points
  • The best to expect from Trump's team in China this week is "incremental change," says Stefan Selig, former official in the U.S. Department of Commerce under the Obama administration.
  • Selig points out that relationship building is important for negotiations in China — something that is difficult to do considering Trump and his Cabinet have not been in office for very long.
  • He says administration officials should focus on eliminating intellectual property theft and creating fair trading practices that allow Western countries to invest in China.
Notion of getting deal done in China is ‘unrealistic’ says expert

Incremental change is the best to expect from the trip by President Donald Trump's team to China this week, Stefan Selig, a former undersecretary of commerce for international Trade at the U.S. Department of Commerce under the Obama administration, told CNBC on Thursday.

"Hard problems are hard to solve," Selig, who is now founder and managing partner of BridgePark Advisors, a financial services firm, said on "Power Lunch." "The notion that we're going to be able to do this [negotiation] in one meeting and we're going to send this team over and actually have something, have a big deal get done, is both naive and unrealistic."

"A big deal is unlikely to happen," he said.

The trip, which includes key members of the Trump administration such as Treasury Secretary Steven Mnuchin; Director of the National Economic Council Larry Kudlow; U.S. Trade Representative Robert Lighthizer; Trump's chief trade advisor, Peter Navarro; Secretary of Commerce Wilbur Ross; and U.S. Ambassador to China Terry Branstad, is an attempt to ease trade tensions between the two countries while discussing the proposed $150 billion in U.S. tariffs and China's counter levies on autos, airplanes and soybeans.

The talks, led by Mnuchin and Chinese Vice Premier Liu He, began on Thursday. The U.S. officials will depart Friday.

Selig, who headed the International Trade Administration at the Department of Commerce from 2014 to 2016 and himself has made five trips to China, pointed out that in Asia, relationship building is an important part of negotiations.

In fact, the Trump administration, in general, is made up of people, "who have been in office for a very short amount of time. So they don't know their counterparts."

John Rutledge, chief investment officer and investment committee member at Safanad, an investment firm, said understanding the Chinese way of negotiations is imperative for both countries.

"[America's] first reaction to trade things is always, tribal chest thumping: America good. China bad," Rutledge, who was awarded Beijing's Great Wall Friendship Award in recognition of his role as a trusted advisor to China's top officials and who has spent time in China, said on "Power Lunch."

But, he said, "The real game of trade are made at the individual level."

The United States imported about $479 billion from China in 2016, but exported only $170 billion, according to the Office of the U.S. Trade Representative. The U.S. goods and services trade deficit to China the same year was $385 billion. Trump said tariffs on steel and aluminum would correct what he deems an unfair trade system.

Meanwhile, the stock market continues to oscillate on news surrounding the visit and investor fears. The S&P 500 fell below its 200-day moving average Thursday morning to 2,615. The Dow Jones industrial average also dropped below the 200-day moving average, down nearly 400 points. The Dow reversed course and closed slightly higher, while the S&P pared some of those losses to end down modestly.

"It doesn't seem like there have been a clear set of objectives that have been laid out by the administration that they're going to achieve, other than the deficit reduction target and other than this industrial policy target," Selig said.

In addition to building relationships, Selig said U.S. officials should focus on issues regarding intellectual property theft and creating a level playing field for Western countries to invest in China.

"If we're focusing on this immediate $100 billion bilateral reduction to our deficit and expecting China to move away from their industrial plan, their so-called Made in China 2025," he said, referring to Beijing's program to upgrade China's domestic manufacturing base by way of more advanced products, "that is not going to happen."