As Washington becomes one big investigation, genuine and significant national security issues are playing out with China. The so-called ‘trade war’ between President Trump and Chinese President Xi Jinping shows little sign of a conclusion anytime soon.
This is a standoff that could last months or even years. But Trump feels little pressure to strike any bargain that is not a totally new set of rules with the Chinese. China’s unfair trade practices have been the norm for the last eight presidents, and Trump vows to stand firm.
There is little doubt the Chinese have far more to lose in this ongoing negotiation. But Xi is reluctant to lose face among his peers. The two leaders will meet at the Group of 20 (G-20) summit next month in Osaka, Japan.
Could that be the right time and location for a lasting agreement? Trump remains crafty, knowing full well he remains in a stronger position than Xi. The rising tariff war may force the two leaders into a settlement.
The most recent trade talks ended last Friday. It led to Trump raising tariffs on $200 billion in Chinese goods to 25 percent while threatening an additional $325 billion on almost all imports.
Naturally, China then announced new tariffs on $60 billion in U.S. goods to around 25 percent by June 1. That will mostly include farmers and small manufacturers, part of Trump’s voting base for 2020.
The president’s decision to delay auto tariffs for six months and lift steel and aluminum tariffs on Mexico and Canada could ease some of the pressure caused by the China spat and encourage financial markets. That could mean more delays in any settlement, and Trump knows that will irritate the anxious Chinese.
Meanwhile, and don’t think the Chinese don’t know this, U.S. unemployment has remained below 4 percent, gross domestic product has grown by more than 3 percent, and consumer confidence is at a 15-year high. Major bargaining chips for a savvy negotiator like Trump.
President Xi is forced to appease multiple factions within the Chinese government. There is little doubt that Beijing’s economy is at greater risk because of its dependence on exports. Trump is well aware of that also.
China must transform its economy to reduce its reliance on debt. The ongoing trade dispute makes it that much worse. If this trade war continues for a long time, a weaker Xi will find it much harder to enact his economic agenda.
Thus, the seemingly moderate tone and approach of the Chinese. That is only recently, though. Last February, a deputies-level meeting grew near hostile in its tone as it seemed Chinese emissaries were backing out on previously agreed issues. That included intellectual property theft and forced transfers of technology.
The talks eventually got back on track, and Trump later announced he would delay a self-imposed deadline to raise tariffs, citing progress in the negotiations. But a similar reversal on China’s supposed commitment to change their laws led to the breakdown of the latest round of talks.
Cooler heads prevailed most likely from strict orders back in China. Treasury Secretary Steven Mnuchin is aware of how deeply entangled the two sides are economically. The U.S. and China traded roughly $660 billion in merchandise last year.
The fact is China holds more than $1 trillion in U.S. debt. It bonds the two countries together until further notice.
Yet Trump acts like that is not reality. Trump has paved the way to block foreign tech companies, such as Chinese telecommunications giant Huawei, from doing business in the U.S. if they are deemed a national security threat by the Commerce Department.
Nevertheless, Trump cites his “close relationship” with Xi. He says there’s reason for optimism that a deal will ultimately get done. The G-20 may be the test of that statement.
