US, China trade terrain forever changed
BUENOS AIRES, ARGENTINA >>
The trade talks that President Donald Trump and Chinese President Xi Jinping launched this weekend have raised hopes for a peaceful resolution of the trans-Pacific tariff war — but the economic relationship between the U.S. and China has been permanently altered.
Over dinner after the Group of 20 summit Saturday, Trump agreed to cancel a planned Jan. 1 tariff increase in return for increased Chinese purchases of American farm and industrial goods.
The two sides also will commence talks about “structural changes” in Chinese practices, including forced technology transfer, trade secrets theft, and nontariff barriers. The goal is to secure an agreement in 90 days.
“Markets should be happy, in that the worst is postponed. But I don’t see the West ever going back to business as usual with China. Too many genies have been let out of bottles,” said Fraser Howie, author of “Red Capitalism,” a book about China’s financial rise, in an email.
Over the past quarter century, American manufacturers grew dependent upon low-wage Chinese workers to produce iPhones, clothing and industrial parts, often at the expense of factory employees in the industrial heartland.
China, in turn, invested more than $140 billion in the United States since 2000, according to the Rhodium Group, further knitting together two economies that account for roughly 40 percent of global output.
But almost a year of heated U.S. rhetoric, escalating tariffs, and tighter investment and export controls have shaken Chinese government officials and global business executives.
As repeated tariff salvos prompt companies to rethink their reliance upon Chinese factories, Beijing is stepping up efforts to wean itself from what it sees as an unpredictable American partner, according to trade analysts, business executives and former government officials.
“Both sides have set in motion policies that won’t be up for negotiation. So it’s not realistic to expect a return to the status quo,” said Wendy Cutler, a former U.S. trade negotiator now with Akin Gump, via email. “We are in a new world.”
A great deal has changed between Washington and Beijing in the almost two years since Trump began implementing his “America First” trade policy.
Trump’s abrupt return to brinkmanship over a new North American trade deal, which he signed Friday along with leaders of Mexico and Canada, underscored U.S. unpredictability.
Returning to Washington, Trump told reporters aboard Air Force One that he will withdraw the United States from the existing North American Free Trade Agreement to present Congress with an all-or-nothing vote on the new pact.
“I’ll be terminating it within a relatively short period of time,” he said. “It’s been a disaster for the United States. It’s caused us tremendous amounts of unemployment and loss and company loss and everything else.”
Many analysts are skeptical that China will make fundamental changes to its state-led economic system in the 90-day talks. But even if it does, and the U.S. tariffs are lifted, the other impediments to free-flowing goods and capital will remain.
Trump has resorted to tariffs more freely than any American leader since the 1930s, and his harder line on China extends well beyond import taxes. The United States is restricting Chinese investments in Silicon Valley, planning new limits on exports of advanced technology products, rethinking student and scientific visas, and accusing China of “economic aggression.”