What’s With Trump’s New China Deal?

There were quite a few issues that created the trade war with China. However, the practices that the US hated of China were not addressed in the China trade deal. While Trump is quick to hail this as a major win, others are wanting to pump the brakes.

What’s the deal?

Chinese Vice Premier Liu He and Donald Trump signed the agreement on Wednesday during a White House ceremony. It took close to two years for the countries to get here, especially with so many trade tensions that led to tariffs that were worth billions’ for each other’s goods.

The “phase one” agreement focuses on China increasing its purchases of agriculture, energy, and other products from the US. They will also add some new restrictions on currency devaluation and technology transfers.

The 86-page document and handshake certainly stabilize the relationship between the two largest economies in the world. The tariffs Trump placed created a hardship on farmers and manufacturers, so this deal will provide them with much-needed relief.

The problem is that there’s no coverage on the longstanding concerns that the US has had over China’s industrial policy, particularly with how Beijing bestows billions of dollars in government subsidies on the state-owned enterprises.

Chad Brown, a senior fellow with the Peterson Institute for International Economics, said that it’s a “giant hole” with no way to get around it.

Trump and various administration officials are aware of the issues. They have also been clear that the agreement has left a few of the trickier issues out. Robert Lighthizer, the US Trade Representative, has already said that it’s not going to solve all of the problems. It is progress, and that’s what the administration is holding onto.

Additionally, this is only phase one.

Phase two is where there will be negotiations to cover more of the outstanding concerns. Trump is already planning to travel to Beijing so that those discussions can take place. However, there is no firm date as to when this will happen and there is no exact path that has been paved to move the discussions along.

Many feel as though Trump is lowering expectations. People were livid that he imposed the tariffs that he did, saying that he was being too hard. They said that it was too troublesome for the manufacturers and the farmers. So, he did what he needed to in order to improve relations.

Now, there are tech companies and businesses in the US saying that Trump has traded away leverage that was hard-earned in order to reach an agreement that doesn’t fix any of the major issues that led to the war two years ago.

It sounds like the rest of the country doesn’t know what they want. They want Trump to get things done but they don’t want him to be too harsh. He’s damned if he does and he’s damned if he doesn’t. Meanwhile, it’s still being hailed by the administration as an “incredible breakthrough” that will lead to a future with China that offers “fair and reciprocal trade.”

Phase two will be highly dependent on how closely China follows through on its commitments within phase one. If they meet the required purchasing figures, it will show that they are committed to making improvements. It will make it easier to clear up some of the glaring issues that are missing within the first part of the deal. However, if they don’t boost their purchases over the next two years, it’s very possible that the US will end up in yet another trade war with China – and that’s when the administration will have no choice but to hold off on any agreement with China until they not only do what they have promised in phase one but also clear up some of the other issues.

With the signing of the agreement, Trump is going to hold off on tariff increases that were once threatened. However, duties on approximately $370 billion worth of Chinese imports will stay right where they are.

The deal did what it needed to do. It’s not perfect but deals rarely are. It has shown that Trump has dealmaking prowess that will help alleviate problems for farmers and manufacturers. With the added purchasing that China will have to do, it can help them immensely. Further, it can help Trump’s re-election campaign as many will want to make sure that he’s around for phase two since it likely won’t start to take form until after the November elections.

Even Daniel Griswold, a senior research fellow from George Mason University admitted that the administration pulled back from a trade war, which is a positive thing.

 

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