After the Trump administration rattled its trade-war sabers, China has responded by proceeding with its planned visit to the US. Over the weekend, the White House threatened to impose the rest of the proposed tariffs in Chinese goods totaling $200 billion when talks on a trade deal appeared to stall. Trump advisers accused China of reneging on previously agreed positions, prompting the threats to escalate the trade war:
President Trump’s top economic advisers on Monday accused China of reneging on previous commitments to resolve a monthslong trade war and said Mr. Trump was prepared to prolong the standoff to force more significant concessions from Beijing.
Mr. Trump, angry that China is retreating from its commitments just as the sides appeared to be nearing a deal and confident the American economy can handle a continuation of the trade war, will increase tariffs on $200 billion worth of Chinese goods on Friday morning, his top advisers said.
“We’re moving backwards instead of forwards, and in the president’s view that’s not acceptable,” his top trade adviser, Robert Lighthizer, told reporters on Monday. “Over the last week or so, we have seen an erosion in commitments by China.”
Just how accurate were those accusations? According to Reuters, accurate enough:
The diplomatic cable from Beijing arrived in Washington late on Friday night, with systematic edits to a nearly 150-page draft trade agreement that would blow up months of negotiations between the world’s two largest economies, according to three U.S. government sources and three private sector sources briefed on the talks.
The document was riddled with reversals by China that undermined core U.S. demands, the sources told Reuters.
In each of the seven chapters of the draft trade deal, China had deleted its commitments to change laws to resolve core complaints that caused the United States to launch a trade war: theft of U.S. intellectual property and trade secrets; forced technology transfers; competition policy; access to financial services; and currency manipulation.
Apparently, China decided that it didn’t want to sign any public commitment to curtail its authority in commerce and trade. Instead, China told the Trump administration, “trust us” — literally:
Liu last week told Lighthizer and Mnuchin that they needed to trust China to fulfil its pledges through administrative and regulatory changes, two of the sources said. Both Mnuchin and Lighthizer considered that unacceptable, given China’s history of failing to fulfil reform pledges.
That’s amusing, considering that has been China’s answer to US trade concerns ever since they got most-favored-nation status a generation ago. If that answer was sufficient, the current trade war wouldn’t have taken place at all. But why make such a sudden and obviously provocative shift this late in the process? One private-sector source told Reuters that Beijing has been struggling to wake up and smell the coffee. “After 20 years of having their way with the U.S.,” the source commented, “China still appears to be miscalculating with this administration.”
Trump himself has other suspicions. He vented that China had hoped to stall the process in order to get a friendlier negotiating partner in the White House — the one that scoffed at China recently as an economic threat to the US:
….Guess what, that’s not going to happen! China has just informed us that they (Vice-Premier) are now coming to the U.S. to make a deal. We’ll see, but I am very happy with over $100 Billion a year in Tariffs filling U.S. coffers…great for U.S., not good for China!
— Donald J. Trump (@realDonaldTrump) May 8, 2019
It’s possible, but it seems unlikely that China would want to remain in this trade war for another 20 months. It seems more likely that Beijing has misread Trump and the situation entirely, even after two years of dealing with him. At the very least, they did not prepare themselves for the pain Trump is willing to endure to force the issue.
This morning, Trump made sure that China got that point too:
It’s official. US tariffs on $200 billion in imports from China going from 10 to 25% at 12:01 AM Friday. https://t.co/HSgpmRuswH
— Shawn Donnan (@sdonnan) May 8, 2019
China might have outsmarted itself this time around. Under normal circumstances and with a “normal” president, the escalation of scandal talk and fights with Congress might convince trade antagonists that the White House would be desperate enough for a deal to force them into a bad one. This president, for better or worse (and usually both), thrives on disputes and battles. Escalation is Trump’s preferred mode of operation. If everyone suddenly cooperated with him and his agenda, Trump would pick a fight with someone just to keep his blood pumping.
Furthermore, this is one of the few fights in which Trump has legitimate bipartisan support. Chuck Schumer tweeted out his support for Trump’s pugnacious approach to China’s renege on Sunday, and he’s hardly the only Democrat unhappy with China’s trade policies. In fact, Biden might find himself more isolated in his party on China that Trump initially was with Republicans at the start of this trade war.
Whether China’s delegation intends to cut a deal while in the US remains to be seen, as Trump says. However, at least they now understand just how angry their opponents are, and how willing they are to expose China’s negotiating tactics and inspire ridicule for their missteps.