President Donald Trump’s trade deal with China — the one he was so vigorously promoting on Twitter just weeks ago — just got more complicated, with U.S. negotiators saying they saw an “erosion of commitments” made by China, and Trump threatening tariffs that could go into effect by Friday.
While these trade talks have been long — spanning 10 months — and tense, Trump’s latest tariffs threat on an additional $200 billion worth of Chinese imports is a remarkable escalation, considering that the Chinese trade delegation is due in Washington for two days of negotiations on Thursday and Friday.
Treasury Secretary Steven Mnuchin, who did not provide details on which commitments were at stake, told Reuters on Monday that Chinese negotiators “were trying to go back on language that had been previously negotiated, very clear language, that had the potential of changing the deal dramatically.”
Bart Oosterveld, director of the Global Business & Economics Program at the Atlantic Council, said these commitments might have to do with better access to the Chinese market for U.S. firms and the practice of forced technology transfer.
China has moved to pass laws that mirror what might be in the agreement, but now they might be more inclined to pass regulations that aren’t as strong in the eyes of U.S. negotiators.
“This might be a sincere misunderstanding,” said Oosterveld. Even if it’s not, the president’s heated responses are often discounted by the Chinese negotiators, who he said are “patient and very pragmatic.”
“Their horizon is very long, looking back and moving forward,” said Oosterveld. “They’re not one to slam the door and walk out.”
‘Trump will back off’
While slapping on tariffs in what is supposed to the final rounds of trade talks also seems dramatic, Robert E. Scott, senior economist and director of trade and manufacturing policy research at the Economic Policy Institute, said he doubts they will actually materialize.
“I think Trump will back off,” Scott told ThinkProgress, noting that the president has made other threats that he has not followed through on, such as closing the U.S. border with Mexico if Mexico doesn’t stop Central American migrants from reaching the U.S. border. Both the United States and China “need this deal,” Scott added, and a trade deal will eventually happen, though probably not by the end of this week.
Still, the damage, in many ways, is already done, with the tariffs largely backfiring.
China, said Scott, “has played its ace in the hole,” dropping the value of its currency against the U.S. dollar, allowing it to offset the cost of imports. Plus, China is North Korea’s largest trade partner, something that could work to its advantage as the Trump administration is trying to negotiate Pyongyang out of its nuclear and long-range ballistic missiles.
Oosterveld said that to the extent that Chinese consumers and business might be feeling the pain — and given the state-controlled nature of the media there, it’s hard to know for sure — the government is prepared to “allocate that pain.”
It’s also worth noting that President Xi Jinping doesn’t have a 2020 reelection campaign to worry about, nor a Congress to contend with, let alone political opponents. So his negotiators are operating with steady hands, not fretting about campaign promises.
Meanwhile, in an attempt to deliver on his campaign promise to fix the trade deficit with China, the president started a trade war with the global giant — which is only one of several he has started with key U.S. trading partners and allies, including Canada, Mexico, and the European Union. And his attempt at a fix has cost Americans a lot of money already.
For one thing, China has responded to U.S. tariffs with its own. Soybean and corn growers have been hit hard, with news of fresh tariffs sending grain stocks into a nosedive on Monday.
Manufacturers of iconic U.S. products, such as Harley Davidson motorcycles and bourbon have also seen sales drop. China has also turned to other markets for certain goods, which means that the cost of the tariffs are being absorbed by American businesses, not Chinese consumers.
At the same time, American consumers are seeing higher prices for goods coming out of China, and are bracing to pay more for textiles and electronics. As the importer of baseball hats made in China told CNN, the $1 million order he’s already put in will be subject to the new tariffs should they go into effect.
“It’s very difficult to understand what the president is going to do by a business perspective. To spring it on us all at once like this is a very poor judgment on his part,” Phil Page, the CEO of Missouri-based Cap America, told the news network.
Scott said Trump’s threats and the yo-yo effect they have had on global stocks make him a very “unreliable negotiator,” which will negatively impact future U.S. negotiations on trade, foreign policy, and security, whether or not Trump is re-elected.
And while the president’s strategy of being seen as unreliable and unstable is touted by some as a means of keeping opponents guessing, this is “a very unpopular strategy among professional, political, and foreign policy experts,” said Scott. Ultimately, he added, the whole approach is “very high-risk.”
“It’s a fundamentally flawed economic strategy to think that we can solve our trade problems by bullying countries one at at a time into submission. And that’s essentially what he’s doing,” said Scott.