Note: As President Xi Jinping arrived in South Florida on Thursday for his first meeting with US counterpart Donald Trump, senior think tank researchers in both countries anticipated reinforcement of their mutual understanding and other positive outcomes.

Many American business leaders would be happy to have President Donald Trump talk tough on trade in his meetings Thursday and Friday with Chinese President Xi Jinping.

But not too tough.

While many companies and industries are hoping Trump can win concessions from America’s largest U.S. trading partner, they’re much less eager to see the two countries square off in a trade war.

“They would like the Trump administration to advocate for [a level playing field],” Tom Manning, a University of Chicago law professor and former CEO of Cerberus Asia, told CNBC. “They do not, however, want the Trump administration to disrupt what has become a stable atmosphere for American business in China.”

Trump’s blistering rhetoric condemning China’s trade practices generated cheers of support on the campaign trail.

“We can’t continue to allow China to rape our country,” Trump told his cheering supporters last year on at a rally in Indiana. “There are no jobs because China has our jobs.”

Trump has accused China of manipulating its currency to boost its exports and criticized companies for shifting production to China.

Since taking office, Trump has kept up his belligerent broadsides on China’s trade policies. Last week, he warned in a tweet that the meeting at his Mar-a-Lago resort on Thursday and Friday will be “very difficult” and “American companies must be prepared to look at other alternatives.”

Some business leaders and industry associations share Trump’s frustration with Beijing’s trade policies, arguing that China has been flooding the U.S. market with cheap products, while tightly controlling foreign investment.

U.S. automakers complain about high Chinese tariffs on American imports compared to U.S. duties on Chinese vehicles. Tech companies have long cited a range of trade disparities, including China’s weak patent protections for U.S. intellectual property.

But retaliation by the U.S. could spark an even broader response from Beijing.

That could jeopardize the bottom lines of businesses that sell products in China, the third-largest U.S. export market, after Canada and Mexico, accounting for nearly $120 billion worth of goods last year.

Trump’s talks with China will also set the tone for a wider American trade policy that could create bigger headwinds for U.S. exporters.

Beyond pressing individual companies directly, Trump has promised broader policies that could restrict the flow of exports on which U.S. companies heavily depend. Those include raising tariffs on Mexico and China. Trump and the GOP-controlled Congress have also floated the idea of a “border tax” on companies sourcing materials and products from overseas.

Those measures would almost certainly cut into U.S. exports, which represent about $2 trillion, or roughly one-eighth of the nation’s gross domestic product.

Even before Trump took office, the engine of global trade had been slowing after decades of liberalized trade deals and lower tariffs helped boost import and export traffic around the world.

That slowdown is one reason the overall pace of the global economic growth remains relatively weak.

But those free trade policies also produced a global backlash — from American voters who’ve lost their jobs and British voters who voted last June to reclaim their independence from the European Union.

Hardest hit

A slowdown in trade with China would be felt unevenly across the U.S., with some states hit much harder than others.

Among the most vulnerable dependent: Washington, which sold roughly a quarter of its exports to China last year, or nearly $19 billion worth of goods. Airplanes, the state’s largest export by far, made up the bulk of the state’s sales to China.

California exports some $16 billion to mainland China, with computers and electronics accounting for more than a quarter of the total. Texas was the third-largest exporter to China, with more than $11 billion worth of products that included chemicals, computers and machinery.

Alaska, which exports a smaller volume of goods, sends $1.5 billion worth of its exports — a quarter of its total — to China. Roughly half of that consists of seafood.

U.S. farm states are also big exporters to China, which is the biggest single market for American agricultural products. Some 20 percent of all U.S. farm exports are sold to China, which bought $30 billion worth of food and other farm products in fiscal year 2014, including soybeans, distillers’ grains, hides and skins, tree nuts, coarse grains, and cotton and beef, according to the U.S. Department of Agriculture.

While the trade stakes are high, most observers see Thursday’s meeting as just the opening round in a series of bilateral talks, with little in the way of concrete immediate policy pronouncements.

For one thing, the Trump administration remains short-handed. The nominees for both trade representative, Robert Lighthizer, and ambassador to China, Iowa Gov. Terry Branstad, have yet to be confirmed. Several key State Department posts related to Asian policy are also still vacant.

Even with a full team in place, diplomatic experts say, the initial meeting between the leaders of the world’s two most powerful nations will be about raising tough issues, not resolving them.

“They’re not going to be solved at this meeting,” Stapleton Roy, former U.S. ambassador to China, told CNBC. “I think what they need to do is to get the issues out in front of them. And then agree between the two leaders that these need to have a process that will produce a positive outcome.”

Original title:

These states would get hit hardest by a trade war with China

By John W. Schoen


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