- + ——F; Cee eee F 5 We may see some fireworks in US-China relations during the Trump administration. With respect to trade, President-elect Trump With respect to foreign policy, many policy can use any one of six US statutes, including the experts have been calling for a change in strategy Trading with the Enemy Act of 1917 and the toward China. In April 2015, the Council on International Emergency Economic Powers Act of _ Foreign Relations published a special report on 1977, to shift trade policy. The latter two statutes China, suggesting that Washington needed “a give him latitude to change foreign commerce new grand strategy toward China that centers without interference from Congress or the courts. on balancing the rise of Chinese power rather President-elect Trump has advocated than continuing to assist its ascendancy.”” The imposing tariffs and labeling China a “currency militarization of the seven artificial islands in the manipulator.” While he has continued to South China Sea (see image on page 33), according threaten tariffs of 45% on imports from China, to the Asia Maritime Transparency Initiative at the there is considerable uncertainty as to what Center for Strategic and International Studies,” his administration will actually impose. If the will only expedite such a shift in strategy. US and China engage in a full trade war, the If President-elect Trump’s actions to date, Peterson Institute for International Economics has such as the telephone conversation with Taiwan estimated a notable drag on US GDP growth over _ President Tsai Ing-wen*’ and his response to the three years.” recent Chinese seizure of a US Navy drone,” are Any of these actions by the Trump any indication, we may see some fireworks in US- administration may provoke a strong reaction China relations during the Trump administration. from China, including a sizable depreciation of the renminbi. Such depreciation would certainly be disruptive to financial markets. 34 | Goldman Sachs | JA