Donald Trump, Xi Jinping, and government officials met over dinner at the G20. After the talks, the United States has decided to put a 90-day delay on plans to raise existing tariffs on certain chinese imports from 10 to 25 percent (valued at approximately $200 billion in addition to the $250 billion placed on China). While other details of initial agreements remain vague and inconsistent, the stated intention on both sides is to attempt to negotiate a proper de-escalation of the trade war, which both nations would benefit from.
On the table are not only tariffs, but also the large trade deficit in favor of China, and their business malpractices blocking and stealing intellectual property from United States companies. So far, no promises have been made on either side, but China has suggested many concessions it plans to consider, including narrowing the trade deficit by purchasing U.S. goods, lowering tariffs, stopping U.S. Fentanyl sale, ceasing to block a takeover of NXP (Dutch manufacturer of computer chips) by Qualcomm, and investigating intellectual property theft. All these promises seem to place the U.S. in good standing, especially having made no major concessions besides the tariff delay. However, Trump’s advisors and policy analysts have not expressed much certainty over the possibility of such a win actually materializing, pointing to China’s vague language, uncertain intentions, and their long standing inaction towards the invasive treatment of tech companies from the U.S.
“Much of the credibility of this discussion will hinge on rapid movement and implementation of China’s commitments.” - Larry Kudlow, U.S. Economic Advisor
Despite the uncertainty surrounding China’s intentions for the ceasefire negotiations, president Trump sent a series of tweets after the summit that pretty clearly portrays the deal in a positive light. He claimed that China is agreeing to “reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%,” with no confirmation or similar announcment from Chinese officials and media. Referencing the trade deficit and China’s apparent pledge to immediately purchase agricultural goods, Trump also touted the benefits that farmers would receive. Farmers for Free Trade remains skeptical because of continuing tariffs impacting their sales.
Although those who get their news directly from the president may see this as a major victory, getting so many promises from China with little U.S. concession, the media and source analysts agree that fairly little of the actual legwork has been done in the negotiation process, and the 90-day stall itself remains a tentative time frame. For the upcoming talks, Trump has appointed Robert Lighthizer instead of Steve Mnuchin, who was the typical negotiator with China. This marks a significant change in the president’s strategy because Lighthizer less moderate than Mnuchin, who is more likely to align with Trump’s “good or no deal” strategy. Lighthizer himself has yet to publicly state his intentions, but the outlook is that China will find it much tougher to renege on their commitments than they might have expected dealing with Mnuchin.
If nothing comes out of the negotiations now being led by a hardliner, it will be seen as a loss for President Trump and possibly for China as well. But there is incentive for both sides to commit to negotiations and at least avoid the further escalation, and the markets have reacted to this. Wall Street has gotten a much needed signal that the U.S.-China relations were improving, and the stocks seem to reflect a hope that the talks are a success (*This has changed since Wednesday with the lack of news about negotiations moving forward and president Trump’s “I am a Tariff Man” tweet, betraying market uncertainty/volatility). The warming of the markets reflect the majority of media opinion as well, despite unwillingness to declare the talks a success. While there are many uncertainties and potential deal-breakers in the mix, this latest tone-shift is still seen as a positive and promising to most sources, and it’s hard to argue against the benefits of the stall when both sides have expressed the willingness to negotiate and offer concessions.
What do you think will happen in the coming days, weeks, and months in regards to the deal with China? Will it be as much of a U.S. victory as it may seem like today? How does Lighthizer's appointment and Trump’s recent comments effect that answer? What could China's true intentions behind these concessions be? And to what extent should the U.S. seek to enforce them and risk jeopardizing the deal?
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11 comments:
It's ridiculous that President Trump has the power to drag the US into this pointless volley of tarrifs despite the entire country (and many of his advisors) completely disapproving of the trade war. Because Trump has promised only a small delay in tariffs in return for the long list of concessions, I doubt that China will go through with the deal as considered. If the deal does go through though, I believe it would be wise for Trump to choose a few concessions and enforce them strongly. We need to display that our international policy is serious, and won't just be thrown out when a new president arrives (as Trump has).
Because we have a trade deficit with China, that is, we import more goods than export, tariffs would hurt Chinese manufacturers proportionally more than Chinese tariffs would hurt American exporters. As such, China should be more willing to negotiate and provide concessions. Furthermore, U.S has leverage in terms of technology. The U.S makes some of the best computer chips in the world, and companies such as Huawei depends on such technology in order to produce high quality products. For example, the recent arrest of Wanzhou Meng, chief financial officer of telecom manufacturer Huawei Technologies, for suspected violation on U.S sanctions on Iran (in selling technologies with embedded U.S components), highlights that the trade war isn't just about tariffs, but also about technology. In 2017, ZTE Corp was accused of a similar breach in U.S sanctions and the U.S punished the company by forbidding it purchase American components such as the telecom chips made by Qualcomm Inc. (Bloomberg). Huawei is currently ranked second in the global manufacturing of smartphones, and limits on U.S technological exports would significantly damage its standing. So again, China should be willing to make concessions. However, at the same time I'm also skeptical that China will actually follow through with whatever they're trying to concede, so I definitely agree with Seiji that whatever concessions China makes, should be enforced by the U.S somehow.
https://www.bloomberg.com/opinion/articles/2018-12-06/huawei-bust-signals-the-real-u-s-trade-war-with-china
It sounds like China and the US are on good terms when it comes to this trade deficit. Hopefully, they can come to a good agreement that would proportionally benefit both parties. Being in a trade deficit that favors the US gives us a favorable trait that is China is more willing to negotiate for tariffs in favor of the US.
The problem with this issue is that it is a bomb waiting to be detonated. With all our debt with China coming in at a woping $1.18 trillion, the danger is that we pressuring China with all these tariffs. As they control about a tenth of our national debt, China is the largest outside source of debt in the world for the US besides domestic citizens. As both Emily and Seiji said above, the concessions that will be given by China will need to be enforced. Yet, despite these dangerous waters that we are wading into, it is important for the US to not buckle down on this issue as it is key to the success of the nation and is not in our best interest to accept anything that comes our way.
I a lot of the solutions to the trade war so far have just been talk and I think this might be to assure consumers and stockholders in the U.S so that there won't be any alarms raised by the stock market. On Tuesday, apparently Chinese negotiators were discussing the possibility of lowering the import tax on U.S cars from 40% to 15%(BBC). U.S manufactured cars such as Tesla have seen their car sales initially hurt by the tariffs but soon after the news that the talks were being productive, the price of shares for BMW rose. On the other hand, tariff solutions were initially just talk for farmers but now are somewhat being fulfilled. At first, soybean farmers were told that their soybeans would go to a reserve in China but nothing happened. Later, however, the Chinese state owned companies began to buy soybeans again(CNN). While this may seem like good news, it is possible that since the tariffs started in July, China might have already found new vendors in different countries. Not only that, there were probably already losses for the farmers which the U.S will have to reimburse. This simply goes to show that even if the negotiation seems to be going well for the U.S in the future, it will be hard to get back the losses from the initial six months of tariffs. I agree that Trump should stop with a few concessions, enforce them, and then prevent the trade war from going too far before American manufacturers are affected even more.
https://www.bbc.com/news/business-46531803
https://www.cnn.com/2018/12/12/politics/trump-soybean-farmers-china/index.html
The trade war with China was one of Trump's bigger mistakes in his presidency. It's definitely the correct decision now to halt these escalations. Trump's trade war has costed huge deficits to the U.S. economy. According to this opinion article on Bloomberg, "the Trump administration’s policies, passed as legislation by Congress and implemented by the executive branch, have driven interest rates higher, made deficits bigger and led to a trade war, and are risking a global slowdown and even a recession."
https://www.bloomberg.com/opinion/articles/2018-12-10/donald-trump-owns-this-stock-market
It's a good sign that Trump has decided to deescalate the trade war with China. Since the US is currently in a better position to negotiate, China is likely to make some concessions and hopefully an agreement that benefits both nations can be reached. Increasing the tariffs even further, as Trump originally planned, would only worsen economic relations between these two countries. It's still to early to predict the outcome of these negotiations since it is still early in the process, but it is in the president's best interest to end the trade war with China and improve the health of our economy.
I agree that it seems from the outside to be a positive step in the direction of the trade war with China. If we are able to make the deal we should also make sure that it is well enforced else it would have all been for nothing. I find it interesting that he is having a new appointment for the negotiation with China and can see it as a possible problem if he is less moderate and stands closer to some of the extreme views that Trump has as well. It may lead to no progress or lead to China having to compromise more than they would initially want to. Improving the US economy would be a big necessary step and would hopefully benefit the relationship between both countries. I feel like what is currently known about what each side will receive with the deal will not be completely true and there will be much less compromise in the end.
I'm uncertain of whether or not these negotiations will actually play out in the future, but if they are legitimate, it is good to see our tensions with China beginning to thaw. We need to cooperate with China in the global economy, and it seems the trade war has been more for China and the United States trying to prove their economic superiority over each other as opposed to supporting their domestic economies as tariffs are supposed to do - economic nationalism at its worst.
As previous commenters have mentioned, there is a lot of uncertainty in the air about these negotiations, but the meeting is positive first step. Trump's presidency has started and been marked by business promises to the American nation, so it is no surprise that he will want to create better trade deals with other nations (even though this trade war has led to debilitating effects on our government and economy). However, due to his unprofessional behavior at times and notably inaccurate public statements, negotiations seem uncharacteristic yet crucial to his presidency in order to build and maintain good relations with other nations and to sustain our economy. If China and the U.S. follow through and an agreement is decided soon, the nations and economies will definitely benefit, but each party should stay within the promises and not breach the negotiation or it will lead to another escalation and conflict.
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