21 mins agoFormer Treasury secretary warns Iran conflict and ‘trust deficit’ could derail US-China meeting

Former U.S. Treasury Secretary Hank Paulson said the United States’ upcoming meeting with China may not happen if the war in Iran continues, as Beijing grows increasingly dissatisfied with the U.S.’ aggressive military campaign.

Paulson said the United States’ relationship with China is the most consequential bilateral relationship, but added there is a “huge trust deficit” that needs to be addressed.

“They are intense competitors with the economy… and they’re adversaries when it comes to military issues,” he said. 

The former Treasury secretary said that because the two economies are so deeply integrated, he described the U.S.-Chinese economic relationship as “mutually assured economic disruption.”

“Each country knows the other can do things to really disrupt their economy,” Paulson told FOX Business anchor Liz Claman. “And they know that. And no country can afford a trade war right now. No country can do that. If this spins out of control, it’s going to go through the economy.”

Paulson predicted how Trump and Jinping’s meeting in May will unfold, suggesting that it will focus on stability.

“Let’s just remember, Liz, that this will hopefully be the first of four meetings,” Paulson said. “And right now there’s a huge trust deficit, but what we know is both want stability, right? And so the emphasis, don’t expect a big breakthrough. Expect the Chinese to welcome him [President Trump], you know, with all the pomp and the ceremony, and the symbolism, and then expect an emphasis on stability.”

“We’re going to see mechanisms for managing trade so it doesn’t spin out of control,” he added. “We’re going to see mechanisms so there can be more cross-border investment. And the biggest thing we need to get out of this is to put guardrails in place so we each understand the other’s red lines, we can compete, and we don’t get into a trade war.”

The former Treasury secretary also commented on the economic impact of Trump’s war on Iran as the ongoing conflict in the Strait of Hormuz causes oil prices to surge.