Trump already has won the trade war with China
When it comes to reaching a trade deal with China, President Trump may be his own worst enemy.
Instead of accepting that he already has achieved the bulk of U.S. negotiating objectives — and effectively won the trade war — the president has been sidetracked by procedural issues and negotiating gambits that distract from the overall success of the administration’s policy.
Just last Friday, the president created a new impediment to ending the trade war by unnecessarily ramping up tariffs as part of a tactical tit-for-tat exchange with Beijing. He did so in spite of the fact that Treasury Secretary Steven Mnuchin declared in late June that the U.S. and China “were about 90 percent of the way there [with a deal] and I think there’s a path to complete this.”
In May, the president told reporters in the Oval Office that “we’re getting close to a very historic, monumental deal” with China.
At this point, the U.S. has won numerous Chinese commitments in the trade negotiations:
- Cutting the U.S. trade deficit through China’s purchase of large quantities of U.S. energy and agricultural products;
- Strengthening intellectual property rights protection and enforcement to prevent forced transfer of U.S. technologies and know-how;
- Ending government subsidies and support to Chinese industries targeted by the Made in China 2025 plan;
- Ensuring fair, effective and non-discriminatory market access and treatment for U.S. investors and companies;
- Reducing Chinese tariffs and non-tariff barriers applied to U.S. products and services; and
- Establishing an effective enforcement mechanism to facilitate compliance and handle future trade disputes.
As a result of these agreed measures, there will be a far more level playing field for trade between China and the United States. China no longer will have the advantages it relied upon in the past to sell extensively into the U.S. market while restricting the activities of U.S. firms in the Chinese market.
Conversely, U.S. companies will acquire rights and business opportunities they never before had to invest in China and trade with Chinese companies. These changes will rectify the imbalance that has characterized U.S.-China trade relations since the U.S. helped negotiate China’s entry into the World Trade Organization in late 2001.
Despite these major achievements, it now appears that U.S.-China relations are going downhill fast, threatening to trigger a global recession. The reason for this state of affairs, not surprisingly, is domestic politics.
In the U.S., President Trump appears to be holding out for a starkly decisive outcome — equivalent to China’s unconditional surrender — to maximize his political standing for winning re-election in 2020.
The president lauds the billions of dollars in new revenue from tariff payments to the U.S. government as evidence the U.S. is “winning,” even though those tariffs raise prices for American consumers. He cites the unprecedented slowdown in China’s economy as “good news” that China will have to buckle under to American pressure — but the established truth is that, by generating mutually beneficial outcomes, trade mitigates international conflicts that otherwise could lead to war.
President Xi Jinping is under at least as much domestic pressure as Trump to show that China will not allow the United States to block China’s economic and political progress. The announcement of increased Chinese tariffs on $75 billion of U.S. products is the most recent example of the pressure on Xi — a measure designed to demonstrate his “toughness” even though the new tariffs will not do significant harm to the U.S. economy.
What matters most to China’s leadership is that China be treated with respect, dignity and equality and not allow itself to be bullied by the United States. Even during the U.S.-China cold war from 1949 to 1973, Chinese leaders held a positive view of the United States because of the historic U.S. commitment to equal trade with China in America’s Open Door policy — wisely formulated by Secretary of State John Hay in the late 19th century to distinguish the U.S. from colonial powers that sought to carve up China and extract the country’s wealth.
At this critical juncture in the trade war, let’s fervently hope that President Trump realizes his policy already has prevailed and successfully recalibrated trade relations in the direction he long has sought.
He might recall writing some years ago in “The Art of the Deal”: “My style of deal-making is quite simple and straightforward. I aim very high, and then I just keep pushing and pushing and pushing to get what I’m after. Sometimes I settle for less than I sought, but in most cases I still end up with what I want.”
Reaching an agreement with China and halting the trade war will give the president at least 90 percent of what he sought — and he will still end up winning the war.
Donald Gross is founding partner of Donald Gross Law, an international trade law and strategy advisory firm in Washington. He worked on U.S. negotiations with China during the Clinton administration as senior adviser to the Under Secretary of State for Arms Control and International Security Affairs from 1997 to 2000, and advised on China negotiations as counselor of the U.S. Arms Control and Disarmament Agency from 1994 to 1997. He is the author of “The China Fallacy: How the U.S. Can Benefit from China’s Rise and Avoid Another Cold War” (Bloomsbury, 2013).
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