If nothing else, the dinnertime agreement between President Trump and Chinese leader Xi Jingping over the weekend seemed to be a temporary vindication of the Trump administration’s economic pressure through tariffs.
Whether such pressure brings about any lasting trade resolution in this complicated relationship, however, remains in doubt.
The agreement postpones an escalation of the tariff war until March 1 (higher duties were to take effect Jan. 1). But significantly, China agreed to restart purchases of U.S. agricultural products and some other goods in the meantime. The United States, on the other hand, made no discernible concessions.
Trump isn’t the first president to express anger over China’s unfair trade practices, its theft of trade secrets, its lax controls over the production of counterfeit goods or its subsidization of industries competing with private U.S. companies.
He is the first, however, to escalate tariffs as a means of forcing change, despite the threats this poses to the U.S. economy.
While the concessions agreed upon differ little from those China had offered a while back, they clearly put the Chinese in the position of appearing to blink first in the showdown. The president said Sunday that China also agreed to reduce tariffs on U.S. auto imports, although that couldn’t immediately be confirmed.
Markets hate uncertainty. The 90-day pause on escalating tariffs ignited a rally on Wall Street. However, it didn’t do much to instill any permanent sense of order. And the president injected a further note of uncertainty as he told reporters on Air Force One he intends to tell Congress he is scuttling the North American Free Trade Agreement all together, according to an Associated Press report. With Democrats poised to take over the House in January, it’s uncertain whether Congress will ratify the replacement deal he negotiated with Canada and Mexico. Failing to do so would leave the three neighbors with no deal at all, bringing chaos to the supply chains that cross borders to produce a variety of products.
But while the president may muster the support to ratify that agreement (Democrats may be naturally disposed to support efforts to return jobs to the U.S.), a permanent deal with China would be much harder.
China’s long-term economic plan, dubbed, “Made in China 2025,” intends to make China the world’s leader in global high-tech manufacturing. It would do this by acquiring intellectual property and subsidizing state-owned enterprises.
Some U.S. analysts say the plan relies on cyber espionage and the unfair treatment of foreign competitors.15 comments on this story
These are precisely the sorts of tactics the United States has long protested. Resolving this dispute in a meaningful way would seem difficult to accomplish in 90 days. The cost to the U.S. economy of imposing further tariffs, meanwhile, may outweigh the benefits of trying to pressure China’s leadership further.
However, no one should discount the value of having the leaders of the world's two largest economies speaking to one another and agreeing to postpone further hostile action.
Higher tariffs would threaten economic growth. If Trump and Xi can agree to one postponement, why not more, so long as progress is being made toward an eventual resolution? Pressing the pause button certainly is preferable to the alternative.