The Washington PostDemocracy Dies in Darkness

As tariffs near, Trump’s business empire retains ties to China

July 5, 2018 at 7:39 p.m. EDT
On July 6, United States tariffs on $34 billion in Chinese imports took effect, firing the first shots in a trade war between the world's biggest economies. (Video: Reuters)

As the Trump administration initiates a possible trade war with China, the president’s businesses continue to benefit from partnerships involving the Chinese government, via state-backed companies and investors.

Chinese government-backed firms are slated to work on parts of two large developments — in Dubai and Indonesia — that will include Trump-branded properties.

The Trumps are the landlord to one of China’s top state-owned banks, which has occupied the 20th floor of Trump Tower in Manhattan since 2008. The bank’s lease is worth close to $2 million annually, according to industry estimates and a bank filing.

And despite the Trump administration’s focus on American manufacturing, assembly-line workers in China still produce blouses, shoes and handbags for the clothing line created by Trump’s daughter Ivanka, a White House adviser.

The tariffs that were set to kick in at 12:01 a.m. Friday are not expected to affect the Trumps’ financial interests, but the family’s business presence in China is awkward as the two countries ratchet up their protectionism.

Trump’s business interest in China is long-standing. He began applying for trademarks there in 2005, and in 2012, the Trump Hotel Collection opened an office in Shanghai, its first in Asia.

Yet in his political career, Trump has repeatedly boasted about his ability to best the Chinese in negotiations, starting with the 2015 speech that launched his presidential bid.

“When was the last time anybody saw us beating, let’s say, China in a trade deal? They kill us. I beat China all the time. All the time,” he said.

Trump’s trade war with China is finally here — and it won’t be pretty, analysts say

Trump did not mention that less than three months before, his company considered another deal with a state-backed entity in China that has not been previously reported.

According to correspondence and financial documents obtained by The Washington Post, the Trump Organization negotiated with a U.S. subsidiary of Shanghai Municipal Investment Group, one of China’s largest state-owned enterprises, to build a luxury project in Manhattan. The proposed deal fell apart when Trump’s company sought an ownership stake in the project without investing any capital.

The proposed deal was handled by Jason Greenblatt, then a Trump Organization attorney and now a White House adviser and special representative on international negotiations. The White House did not respond to requests for comment.

“We are excited to potentially be working with you,” Greenblatt wrote to the Shanghai group, after weeks of discussions in the spring of 2015.

He proposed partnering to purchase 1710 Broadway, a dated office property in Midtown Manhattan, and develop a “first class, mixed use development including retail, residential condominium and hotel components.” The project had a proposed height of more than 1,000 feet, 30 stories higher than Trump Tower, with soaring Central Park views.

Under the proposal, SMI USA and its president, Tom Tao, would have been responsible for obtaining all financing for the $739 million project, and the Trump Organization would have received an ownership slice as well as fees for developing the project, managing the hotel, marketing the residential units and licensing the Trump name. A photograph shows Trump posing with the Chinese investors in his office that March, giving a thumbs-up while clad in his signature red tie.

However, on March 26, 2015, the morning after Greenblatt sent the proposal, a broker on the deal, Peter Wu, responded with alarm, saying it skewed from “the basic terms agreed to from our first meeting with Donald.” He suggested that Ivanka Trump had scuttled it because she wanted an ownership stake without putting any of the company’s own money at risk.

“Donald and Ivanka both decided against it, maybe because they were going to save their money for their presidential run or they just didn’t want to put any equity in and wanted to use other people’s money,” said one executive involved in the discussions, who spoke on the condition of anonymity because the negotiations were meant to be private. “It was basically an insult.”

The two firms remained in discussions on assorted other properties, including the possibility of Trump branding an SMI-backed project at 138 East 50th St.

“It was wonderful to meet you in person yesterday. I very much enjoyed our conversation and appreciated getting to know you better. I look forward to spending more time together in the near future!” Ivanka Trump wrote to Tao on May 1, 2015.

Executives at SMI did not respond to requests for comment.

As president, Trump promised he would do “no new foreign deals” while in office. He has resigned from his company and said he is focused on the presidency. In a statement, the Trump Organization said it has no “existing or future plans for expansion into China.”

But other Trump business relationships with Chinese partners are fully active and are among the main examples plaintiffs in multiple court cases have cited in allegations that the president is violating the Constitution’s “emoluments clause” by accepting payments from foreign governments.

In court, Justice Department attorneys have defended his company’s dealings and asked that the cases be dismissed.

In recent months, two of the Trump Organization’s foreign partners — developers in Dubai and Indonesia, each building residential complexes that include a Trump golf course — have announced new partnerships with state-run Chinese companies.

On June 10, Dubai’s Damac Properties announced that the state-run China State Construction Engineering Corp. had been awarded a contract to build roads and infrastructure at the new Akoya Oxygen. Trump will be paid to operate a golf course there, his second in the area, and paid for the use of his name.

The contract with the Chinese-run company was first reported by McClatchy.

In May, Trump’s partner in Indonesia — MNC Corp. — announced that it had signed a construction contract with another state-run Chinese company, the Metallurgical Corporation of China, for its planned Lido City development. Plans for that project, in a mountainous area of West Java, include a Trump-branded golf course, hotels and villas.

Days later, Trump announced his support for Chinese-backed telecommunications firm ZTE, a departure from his previously aggressive stance toward Chinese industry that prompted Democrats and ethical experts to question whether the two actions were related.

The Trump Organization does not own and is not developing the Dubai and Indonesia properties. In a statement, the company stressed that the Chinese firms are not direct contractors with the Trumps and are working on separate aspects of the developments from the president’s.

“The recent contract that was awarded by MNC Land is for a theme park project that is totally separate and unrelated to the planned Trump project in Indonesia,” the company said. MNC issued a statement saying that the theme park project “is wholly owned by MNC Land and has no relationship to the Trump Organization.” It said its deals with Trump were signed in 2015, before he became president.

Nonetheless, Sen. Richard Blumenthal (D-Conn.), a lead plaintiff in a lawsuit against Trump for accepting foreign payments, raised the Chinese contract with MNC as an example of deals he said the Constitution requires Congress to approve.

“We can’t approve what we don’t know,” he said.

Other Trump interests in China have not garnered similar headlines.

Trump told Forbes in 2015 that he “just renewed” the Trump Tower lease for the Chinese bank, the Industrial and Commercial Bank of China. It expires in October 2019, according to Bloomberg News, a timeline that indicates the companies may have begun negotiating an extension. Both firms declined to comment.

Congressional response to concerns about Trump’s business while he is in office remains piecemeal, particularly because no direct link between Trump’s interest in China and his policies has been made. Last month, the government’s top ethics official, David J. Apol , responded to an inquiry by more than 60 congressional Democrats, saying that their assertions about Chinese support of the Indonesian project “raise serious concerns” — though he said he lacked the authority to investigate.

Sens. Mark R. Warner (D-Va.) and Marco Rubio (R-Fla.), members of the Intelligence Committee, made a bipartisan request of the president June 26 to reinstate the ban on ZTE, writing that “the Senate and the U.S. Intelligence Community are in agreement that ZTE poses a significant threat to our national security.”

Meanwhile, the global economy has awaited Trump’s tariffs on $34 billion worth of Chinese goods — a measure the Chinese have promised to match, potentially triggering a trade war that could metastasize.

Scott Kennedy of the bipartisan Center for Strategic and International Studies said to expect the United States and China to “go over the cliff” Friday and escalate things.

“What we don’t know is if the president has the appetite for a brutal trade war,” he said.

Trump’s motive in levying the tariffs, Kennedy said, was to not be seen as backing down in the face of a trade imbalance that he has made an issue of since his first day on the campaign. He said he hoped the president’s business interests were not a factor.

“There are certainly deep appearances of conflict of interest, and it would be wise to eliminate those conflicts or constrain them as much as possible,” Kennedy said. “But I don’t think those are really at play here. It looks bad, but I don’t think that’s really the issue.”

Jack Gillum and Shibani Mahtani contributed to this report.