Initial deal de-escalates trade war with China
However, the deal does little to resolve the United States’ biggest concerns about China’s trade practices
When President Donald Trump and China confirmed Friday that they had reached an initial trade deal, it helped defuse tensions in a 19-month trade war and avoided another round of punishing tariffs scheduled for this weekend.
But a trade deal that took nearly two years to reach and inflicted global economic damage in the process does little to resolve the United States’ biggest concerns about China’s trade practices, including its use of industrial subsidies and state-owned enterprises to dominate global industries like steel and solar panels.
If signed, the deal would increase Chinese purchases of American farm and energy products, place limits on Beijing’s ability to weaken its currency and provide greater protections to US companies operating in China. It would also reduce some of Trump’s tariffs and forestall new tariffs slated for Sunday.
Yet its main benefit may be to help Trump politically —allowing him to promote large gains to American farmers devastated by the trade war, calming anxious investors and convincing voters before the 2020 election that he has lived up to his promise to get tough on China.
“It’s a phenomenal deal,” Trump said Friday at the White House. “The China deal covers tremendous manufacturing, farming, a lot of rules, regulations, a lot of things it covers. It’s a Phase 1 deal, but a lot of big things are covered. And I say affectionately: The farmers are going to have to go out and buy much larger tractors because it means a lot of business, a tremendous amount of business.” Trump, who campaigned on rewriting the rules of global trade in America’s favor, has spent the past two years upending diplomatic processes that have long governed trade policy. He has pressured trading partners by threatening to scrap existing deals and imposing more tariffs than any other president in modern history. The United States now has the highest tariff rate of any advanced nation, higher than even China, India and Turkey.
Whether that approach has achieved Trump’s goal of putting “America First” is an open question. While many credit his tough tactics with bringing trading partners to the table, others say it has failed to produce bigger gains than those achieved through traditional trade negotiations and destabilised the global economy in the process.
“Pardon me if I don’t pop Champagne, but aside from a cessation of continued escalation, there is not much worth cheering,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies. “There is still significant ambiguity about what is in the deal, but based on what we can surmise, it is unclear if the struggles of the past two and a half years have been worth it. The costs have been substantial and far-reaching, the benefits narrow and ephemeral.”
The China deal was Trump’s second trade victory of the week, after Democrats agreed to support a revised North American Free Trade Agreement, moving it closer to becoming law. Businesses welcomed the update of the 25-year trade pact, and tech companies in particular have praised the agreement’s strong protections for technology.
“The principal commercial benefit of both agreements appears to be the avoidance of what would have been self-inflicted harm — tariff escalation with China and termination of NAFTA,” said Michael J. Smart, a managing director at Rock Creek Global Advisors, an advisory firm.
The China deal also averts what would have been an economically damaging escalation of the trade war before the holiday season and the 2020 campaign. Trump had planned to slap 15% tariffs on shoes, laptops, toys and other goods Sunday—a move that would have resulted in the United States taxing nearly every Chinese import and most likely inciting more retaliation from Beijing.
The United States has now collected more than $39 billion from the tariffs placed on $360 billion worth of Chinese goods, which Trump says China pays but economists say falls heavily on American businesses and consumers.
Robert Lighthizer, Trump’s top trade negotiator and one of the administration’s biggest China hawks, said in a briefing that China had made substantial commitments to increase purchases of American agriculture, energy, manufacturing and services products.
© 2019 The New York Times