21 December 2018

After U.S. Tariffs On China, a Tenuous Trade War Truce

As widely expected, U.S. President Donald Trump and his Chinese counterpart Xi Jinping declared a truce in their trade war in early December. According to the White House statement after their meeting at the G-20 summit in Buenos Aires, Xi committed to increase imports of American agricultural and energy products to reduce the bilateral trade deficit and to immediately begin negotiations over China’s unfair trade policies. In exchange, Trump agreed that he would not increase tariffs from 10 percent to 25 percent on $200 billion in Chinese exports as scheduled on Jan. 1, but that he could do so later if there is no broader agreement within 90 days. The Chinese statement was not so specific, saying only that it would import more from the U.S. and that the two countries would “work together to reach a consensus on trade issues,” with no mention of a deadline. Vagueness plus a tight U.S. deadline virtually guarantee that this is only a temporary truce. 

This should all sound very familiar. On three prior occasions, Trump administration officials announced similar deals to increase American exports and address trade barriers in China. Chinese officials, however, denied that there had been specific commitments made. The trade war has already hit American farmers hard and rattled stock markets.

That, along with signs that economic growth will slow next year, put pressure on the president to avoid further escalation. But in the end, Trump got essentially the same deal that had been announced after prior rounds of negotiations—or maybe even less. The fundamental problem for America’s trading partners, including China, continues to be that it is not clear what Trump’s bottom line is.

Donald Trump and Xi Jinping declared a truce in the trade war triggered by U.S. tariffs on China, but it is unlikely to last. To learn more, read Don’t Count on the Truce Holding in Trump’s Trade War With China for FREE with your subscription to World Politics Review.

As with the trade war truce with China, Trump has announced a number of similar trade deals this year, touting each one as the best, greatest, most wonderful agreement ever. Time after time, however, the reality fell far short of Trump’s hype. Indeed, the announced “agreements” with Europe, Japan and China merely began the process of negotiating. And far from replacing the “worst trade deal ever,” the U.S.-Mexico-Canada Trade Agreement mainly updates and tweaks the North American Free Trade Agreement, or NAFTA. One thing none of these agreements accomplished was to get rid of the tit-for-tat tariffs with these trading partners, including the only substantive deal of the lot with Canada and Mexico. Trump’s trade truces are better than the alternative of further escalation, of course. But despite what Trump keeps asserting about tariffs making America rich, it is Americans who are paying billions of dollars in higher tariffs and losing sales on exports. 

The first truce in Trump’s trade wars came in July. During a visit to the White House, European Commission President Jean-Claude Juncker pledged along with Trump to refrain from further escalation of the trans-Atlantic trade dispute and try to work things out. Their joint statement was vague, however, and the U.S. steel and aluminum tariffs on the European Union, and the EU’s retaliatory tariffs, remain in place. The good news is that the agreement headed off, for now, the imposition of new retaliatory tariffs between the U.S. and the EU. 

Trump has enjoyed some modest successes on trade deals, but in typical fashion, he has oversold them. “It’s not NAFTA redone. It’s a brand new deal,” he declared triumphantly at the White House in October, announcing the revised free trade agreement with Mexico and Canada. But Trump’s brand new deal is really just the Trans-Pacific Partnership with a few tweaks, and many fewer countries than the 12 that signed on before Trump withdrew. American negotiators won concessions in a few areas that were important to them, and made concessions in a few that were important to Mexico and Canada. But the new NAFTA, which Trump clumsily renamed the United States-Mexico-Canada Agreement, or USMCA, is anything but a “brand new deal.” The new North American agreement might more accurately be called the TPP minus nine. 

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