Many obstacles remain
Why a meaningful U.S.-China trade deal could be hard to reach
WASHINGTON — Under President Donald Trump, America’s trade deficit with China has so far worsened to a record high. That gap represents an unfulfilled Trump pledge just as talks between the world’s two largest economies may be nearing a potential deal to suspend their trade war.
Despite signals from Chinese and U.S. officials that some truce could soon be at hand, there are few signs of any truly transformed trade relationship. Beijing’s longstanding policy of subsidizing its own businesses and charges that it illicitly obtains U.S. technology remain key obstacles.
In 2018, America’s trade deficit in goods with China - the gap between the value of U.S. goods that China buys and the higher value of what it sells to the U.S. - swelled to a record $419.2 billion, according to a Commerce Department report Wednesday.
A senior Trump administration official asserted that progress had been made during trade talks over the past two weeks, only to acknowledge that the eventual outcome remains a mystery and that China faced no timetable for responding to the U.S. priorities. The official insisted on anonymity to discuss private conversations.
U.S. and Chinese officials have hinted that some kind of agreement could be finalized by the end of March, with Trump and President Xi Jinping possibly meeting to formalize the deal at Trump’s private club in Mar-a-Lago, Florida. For its part, Beijing is publicly expressing its intent to crack down on policies that have long enabled Chinese companies and local government officials to force American and other foreign businesses to share their technology as the price of admission to the vast Chinese market.
But such public pledges represent far less than the enforceable commitments to reform such policies that U.S. negotiators are seeking.
Last year, Trump imposed a series of tariffs on Chinese goods in hopes of pressuring Beijing to support more favourable terms for the United States. In June, the White House levied import taxes of 25 per cent on $50 billion of Chinese imports. It followed in September with 10 per cent duties on an additional $200 billion. All told, the U.S. tariffs covered roughly half of what the U.S. buys from China.
But the blowback from the Trump tariffs - and China’s retaliatory import taxes on U.S. goods - has been steady, at home and abroad. Many businesses are now paying higher costs to import electrical components and other goods from China that aren’t made in the United States. The duties cost consumers $1.4 billion a month and businesses $3 billion a month by the end of last year, according to research released last week by Mary Amiti, an economist at the Federal Reserve Bank of New York, and economists from Princeton and Columbia universities.
And a survey led by the Federal Reserve Bank of Atlanta found that the tariffs had caused U.S. companies to cut their spending on large equipment by 1.2 per cent, or $32.5 billion, last year.