World Politics

Like Trump, China's Xi needs 'phase one' deal for a political win at home, expert says

Key Points
  • Any trade deal between the U.S. and China "needs to be a win-win," said Steve Okun, senior advisor at consultancy McLarty Associates.
  • Okun added that in light of political challenges such as Hong Kong, he can't see Chinese President Xi Jinping signing an agreement if existing tariffs are not rolled back.
  • That's especially so after China seemingly addressed some of the U.S. concerns by agreeing to increase agricultural purchases, open up China's financial sector and strengthen intellectual property rights, he said.
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The US-China trade deal 'has to be a win-win': McLarty Associates

Chinese President Xi Jinping has had a "horrible couple weeks" politically — and he's not likely to sign a "phase one" trade deal with U.S. President Donald Trump without any roll back in existing tariffs, one expert said.

"China has politics the same as U.S. has politics. Trump has to play to his base, Xi has to worry about his internal politics, he has to worry about his standing within the party," Steve Okun, senior advisor at consultancy McLarty Associates, told CNBC's "Street Signs Asia" on Wednesday.

Any trade deal between the two countries "needs to be a win-win," Okun said, and delaying new tariffs may not work.

In light of political challenges facing Xi such as Hong Kong, Okun said he can't see the Chinese leader signing an agreement "in which he gets nothing other than the postponement of new tariffs."

In addition to the stalemate in the U.S.-China trade negotiations, the protests in Hong Kong could be another major challenge to Xi's authoritative rule, according to political commentators and media reports.

The former British colony, which returned to Chinese rule in 1997, has seen widespread demonstrations since early June, some of which have led to violent clashes between protesters and the police.

President Xi is not in a great position right now, he's had a horrible couple weeks; President Trump has had a horrible couple weeks. Both sides really should be looking for a win-win...
Steve Okun
McLarty Associates

Those protests also led to the U.S. Congress passing the Hong Kong Human Rights and Democracy Act last week, which many saw as a way to pressure China to refrain from violently cracking down on protesters. The bill comes at a time when both sides are negotiating a "phase one" deal, and Trump has called the Hong Kong situation a "complicating factor" in trade talks.

However, trade experts, including Okun, said Hong Kong wouldn't be a direct hurdle to the U.S. and China reaching a deal. The bigger issue is whether Trump would roll back existing tariffs — as China has repeatedly called for — at a time when Xi appears to need a political boost back home, said Okun.

That's especially so after China has seemingly addressed some of the U.S. concerns by agreeing to increase agricultural purchases, open up China's financial sector and strengthen intellectual property rights, explained Okun.

"President Xi is not in a great position right now, he's had a horrible couple weeks; President Trump has had a horrible couple weeks. Both sides really should be looking for a win-win, they haven't to date," he said.

WATCH: What is Hong Kong's relationship with China?

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What is Hong Kong's relationship with China?