Trump faces dwindling leverage with China

China’s refusal to yield in trade negotiations with the U.S. has left President TrumpDonald John TrumpGOP congressman slams Trump over report that U.S. bombed former anti-ISIS coalition headquarters US to restore 'targeted assistance' to Central American countries after migration deal Trump says lawmakers should censure Schiff MORE with dwindling leverage as he seeks a deal that will have profound consequences for his reelection prospects.

President Xi Jinping and top Chinese officials have signaled a willingness to accept lagging economic growth under the weight of U.S. tariffs rather than appease Trump with major concessions. 

That stance may be the greatest obstacle for next month's trade talks between leaders of the world's two largest economies. 

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The U.S. and China have both taken steps to ease tensions with small signs of goodwill heading into the planned October trade talks.

Trump has delayed a pending 5 percent increase of 25 percent tariffs on $250 billion in Chinese goods, and Beijing has exempted more than a dozen U.S. goods, including pork and soybeans, from its own tariff hikes.

But those sprigs of goodwill seem unlikely for now to lead to a bigger deal, according to observers.

As next year’s presidential election looms, Trump is facing growing political pressure to escape the trade war with something to show for it. But it’s far from clear that China feels pressure to give him anything.

“In political terms, the Chinese have more staying power than we do,” said William Reinsch, a senior adviser at the Center for Strategic and International Studies who served as a Commerce Department undersecretary in the Clinton administration.

“They don't have an election, and they have a government that puts party control at the top of the priority list, more than the economy. So I think they're prepared to wait us out, painful though it may be,” he said.

China’s export-driven economy has faltered in the year-plus trade war as U.S. tariffs exacerbate a broader domestic slowdown. The country’s central bank announced last week it would pump $128 billion of stimulus into the Chinese economy, two months after gross domestic product growth there slumped to 6.2 percent, the slowest rate in 26 years.

Even so, China experts say the political cost of appeasing Trump could be more damaging to Xi, who is seeking to cement his power in the Communist Party while expanding his influence over the world economy.

Trump’s battle to transform the U.S.-China trade relationship is a central pillar of his economic agenda and political appeal. His 2016 campaign pledge to upend what he called decades of capitulation toward Beijing helped give the president stunning electoral victories in Pennsylvania, Wisconsin and Michigan, where past trade deals led to an exodus of manufacturing jobs.

Trump has sought to fulfill that promise by imposing tariffs on more than $350 billion in Chinese goods while demanding fundamental economic reforms from China. The president is asking Beijing to boost purchases of U.S. crops and livestock, halt decades of alleged intellectual property theft, and eliminate other barriers for foreign businesses operating in China. 

But as Xi seeks to dominate commerce in the Eastern Hemisphere while suppressing pro-democracy protests in Hong Kong, the Chinese president is wary to be seen bowing to a foreign rival.

“There’s no question that the tariffs have done some harm to the Chinese economy. So it's preferable to continue talking and try to avoid further escalation,” said Edward Alden, a senior fellow at the Council on Foreign Relations. 

“That's very different from saying the Chinese are prepared to do a deal which would require them to make fundamental changes to the structure of their economy,” he added,

Unlike Xi, Trump faces growing political pressure to live up to his hawkish stances ahead of a difficult bid for reelection. As Trump struggles to clinch a trade war he once said would be “easy to win,” several Democratic presidential candidates mocked him during Thursday’s primary debate.

“President Trump has often said he'd like to see me making a deal with Xi Jinping,” said South Bend, Ind., Mayor Pete ButtigiegPeter (Pete) Paul ButtigiegButtigieg tweeted support for 'Medicare for All' in 2018 Overnight Health Care — Presented by National Taxpayers Union — House Dems change drug pricing bill to address progressive concerns | Top Republican rejects Dem proposal on surprise medical bills | Vaping group launches Fox News ad blitz Democrats have reason to worry after the last presidential debate MORE.  “I'd like to see him making a deal with Xi Jinping. Is it just me, or was that supposed to happen in, like, April?”

Sen. Kamala HarrisKamala Devi HarrisHillicon Valley: FCC approves T-Mobile-Sprint merger | Dems wrangle over breaking up Big Tech at debate | Critics pounce as Facebook's Libra stumbles | Zuckerberg to be interviewed by Fox News | Twitter details rules for political figures' tweets Democrats have reason to worry after the last presidential debate 2020 Democrats recognize Pronouns Day MORE (D-Calif.) then bashed Trump for conducting “trade policy by tweet, frankly, borne out of his fragile ego” and compared the president to the Wizard of Oz — a small man hiding behind a curtain trying to project power and strength.

Trump has frequently argued that Xi will be forced to strike a deal as the Chinese economy slumps while the U.S. holds strong. Though the U.S. economy has slowed throughout 2019 and the manufacturing sector has slipped into recession, the country still boasts unemployment near record lows, strong consumer spending and modestly rising wages.

“They want to do something because their supply lines, their supply chains are being broken like toys,” Trump told Republican lawmakers Thursday at the GOP retreat in Baltimore. “Millions of jobs in China are being lost. And we don’t want that, but we want a fair deal.”

While Trump insists that the U.S. has the upper hand, the president might be overestimating his economic leverage over Xi, said David Bulman, assistant professor of China studies at Johns Hopkins University. 

“The Chinese are relatively confident that their economy will be fine, especially through the 2020 election, so they're not willing to go for some of the larger asks,” Bulman said. 

“Trump, and often many American economists, overstate the impact that these tariffs are having right now in China. The Chinese economy is slowing but mostly for other reasons,” he said.

China’s reluctance to meet Trump’s demands has made it all but impossible for the U.S. to strike a comprehensive deal. Experts say that the only viable agreement would be a pact in which China agrees to purchase more U.S. crops and livestock in exchange for tariff relief.

Yet such an agreement would be considered an “embarrassing deal” for Trump, said Alden, leaving him vulnerable to attacks from his eventual Democratic challenger.

“If Trump leaves, it's a failure on his signature issue,” echoed Reinsch. “He's painted himself into a corner.”