Post #239: The US-China Trade War: A Cease-fire, Nothing More

The Financial Times reported on July 10 that Donald Trump, at his last meeting with Xi Jinping in Osaka in June, promised to “tone down” criticism of China’s actions in Hong Kong in return for progress on trade talks.  Such is the way of Donald’s world:  Making a deal with authoritarian regimes is always preferable to protecting human rights. Even so, don’t hold your breath on the those trade talks; appearances are deceiving.  While news reports cited mutual concessions at the sideline of that meeting—Trump permitting resumption of business between Huawei and US technology firms, and Xi Jinping promising to buy lots of US farm products—Trump’s usual comment (“we’ll see”) tells the real story, which is that the two sides agreed to a cease-fire, nothing more (www.bloomberg.com/news/articles/2019-06-29/u-s-china-trade-truce-side-by-side-comparison-of-statements).

Here is what the Trump-Xi understanding did not accomplish.  First, it did not eliminate current US tariffs of 25 percent on $250 billion of Chinese exports.  Second, it only postpones additional US tariffs on the remaining $300 billion in Chinese exports.  Third, China has announced no concession on intellectual property rights belonging to US corporations.  Fourth, the reprieve granted Huawei is tentative, though it is apparently loose enough to allow US technology companies to seek exemptions that would enable them to resume doing business with Huawei (www.wsj.com/articles/mnuchin-urges-u-s-firms-to-seek-huawei-exemptions-11562798183).   Still, the company may be hostage to successful completion of the entire trade deal, especially if   liberal and conservative sustain their objections to the reprieve on national security grounds (such as Senator Marco Rubio’s claim the deal was “a catastrophic mistake”).

Trump thinks he’s got China in a bind: The US, he told Fox News, is “taking in a fortune, and frankly [it’s] not a very good thing for China, but it is a good thing for us.” But that’s fake news on two counts: US import duties are not enough to make up for the roughly $28 billion in promised government aid to farmers hurt by the trade war, and China has made up for a good deal of lost business with the US by increasing exports to Europe and Southeast Asia.  Meantime, Chinese imports of US goods are way down, especially of soybeans—as much as 30 percent according to Simon Rabinovitch of The Economist. As far as this latest US-China understanding goes, Goldman Sachs was appropriately cautious, saying “No substantive progress was announced on the main issues in the dispute.”  Industry leaders, who were nearly unanimous in protesting Trump’s tariffs, aren’t celebrating the new understanding either (www.cnbc.com/2019/06/29/g20-summit-trump-and-xi-agree-to-talks-but-offer-no-clear-path-to-end-the-trade-war.html).  They’re reduced to hoping for the best.  Good luck.

The politics of the trade war is central to what is really going on.  Trump knows he must credibly claim a win to reassure his base, including skeptical farmers, that he hasn’t given anything way as election time approaches.  He knows, and the Chinese know, that a Democratic aspirant is in the wings, someone who would be far more open than Trump to negotiating an end to the trade war, even if not to trade frictions.

As compelling a drama as the trade war is, it is only one piece in a troubling overall deterioration of US-China relations.  China’s naval advances, US military aid to Taiwan (a new $2 billion sale is in the works), Congressional efforts to limit visas to Chinese students and scholars, political pressure on US universities to close Confucius Institutes and investigate Chinese-American faculty as possible spies, China’s successful push in Europe for its Belt and Road Initiative, warmer North Korea-China ties, differences over Iran, and stronger China-Russia relations are all signs of intensified US-China competition. The extraordinary Hong Kong demonstrations, which might lead to China’s military intervention to quell, and China’s mass incarceration of Uyghurs and other Muslims—the latter condemned, by the way, by twenty-two countries (but not one Muslim-majority one) in a letter to the UN High Commissioner for Human Rights (www.nytimes.com/2019/07/10/world/asia/china-xinjiang-rights.html) —show that, Trump’s accommodating view notwithstanding, the struggle for human rights and dignity must be pursued even at the cost of doing business. (See the powerful essay on Hong Kong by the artist Ai Weiwei at www.nytimes.com/2019/07/12/opinion/hong-kong-china-protests.html.)

While signs of increased US-China cooperation are becoming harder to identify, cooperation in the pursuit of common interests must go on alongside competition and policy differences. As over 130 China specialists said in an open letter to Trump, maintaining positive relations with China is essential (www.washingtonpost.com/opinions/making-china-a-us-enemy-is-counterproductive/2019/07/02/647d49d0-9bfa-11e9-b27f-ed2942f73d70_story.html).  They remind us that China does not seek, and has many liabilities should it seek, global leadership.  But it is becoming closer to Russia, economically and militarily, a development surely not in US interests.  So it was strange to read a New York Times editorial of July 21 that said: “President Trump is correct to try to establish a sounder relationship with Russia and peel it away from China” –exactly the opposite of what US policy should be.  The US has far more interests and opportunities in better relations with China than with Russia, among them the climate crisis, North Korea’s nuclear weapons, and of course trade and investment.  And let’s keep in mind that it is Russia, not China, that is interfering in US elections.

Playing up the China threat has lately has become standard procedure among liberals and conservatives alike, and has caused most Americans to view China as a rival–a change from past years.  But the “China threat” thesis exaggerates Beijing’s intentions, capabilities, and allure.  Indeed, the latest Chinese national strategy paper, just released, identifies domestic threats as primary, specifically “separatism.”  A foreign policy based on hostility to China endangers national and international security, not to mention the world economy.  A cease-fire in the trade war is of little significance unless these other disputes are addressed and diplomacy replaces confrontation.

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