Trump discusses trade war deal with U.S. ambassador to China, Ambassador Branstad to discuss a deal on the trade war. (Flickr)
Trump is stuck in the middle of a trade war with China that has raged on for the past year. This series of tariffs has been a back and forth between the U.S. and China, each country threatening to impose heavier taxes than the other if they don’t acquiesce to certain demands.
The “trade saga,” which began with Trump’s 25% tariff on aluminum and steel imports from all countries excluding Canada and Mexico, has now rests on the scale of hundreds of billions of dollars.
The last taxes were levied by China on more than 5,000 U.S. imports, totaling about $60 billion. This, however, was only really a retaliation to the $200 billion tariff on Chinese good that Trump had imposed just a few hours prior.
Because both countries’ economy are enduring the tariffs from the opposition, it’s important to understand Trump’s rationale behind this war.
Trump’s principles boil down to three main issues that he’s been preaching since his campaign for the presidency.
First and foremost, Trump’s tariffs are enacted in order to reduce the growing trade deficit that the U.S. runs with China, which reached a peak $375 billion in 2017. He also, however, contends with the theft of American intellectual property and China’s $300 billion transformation blueprint, coined “Made in China 2025,” that U.S. officials claim would make it impossible for U.S. companies to compete in the world’s most vital markets.
China, on the other hand, is looking to establish itself as an economic and technological world power. China is a country that was unable to sustain and feed the 30 million people that starved while President Kennedy, in 1961, promised to send a man to the moon. While American officials view “Made in China 2025” as a way to steal American intellectual property and monopolize domestic markets, China simply sees itself as a country that’s simply trying to catch up.
Both countries believe that they’re being taken advantage of by the opposition, and so they prolong the trade war. And while neither side is keen to keep enacting and suffering tariffs, there seem to be little end in sight.
In fact, Trump insists on maintaining a “reciprocal tax.”
“We’re going to be doing a reciprocal tax program at some point.” When referring to China, Mr. Trump said, “It’s a mirror tax. They charge us 50, we charge them 50.”
That’s not to say, however, that Trump hasn’t made progress on the issue. According to Trumo, he’s upheld his values and done a great job of forcing the Chinese into a deal. He set a hard deadline — March 1, 2019 — and threatened to raise tariffs on another 6,000 types of Chinese imports if Chinese officials didn’t make reforms by that deadline. This, in his eyes, has pressured Chinese officials to meet with the U.S. and strike a deal that will finally repair the unfair trade relations.
Yet, crowds of people are furious at Trump for several reasons.
Some people think that Trump’s trade war not nearly enough to force anyone to change much at all, except where things were changing anyway. China has been trying to stray away from its reliance on American trade by conducting its own domestic research and development. This has propelled China past the U.S. in many industries, like artificial intelligence and 5G.
Furthermore, people think that Trump, after recently failing to cut a deal with Korean Supreme Leader Kim Jong Un, will be hasty to make a deal that won’t truly resolve the crux of the issue.
Trump will likely ask for increased trade from China, which was already on course to happen before he initiated the trade war. It’s probable that he will demand more protection against intellectual property theft, which China will happily oblige to in order to protect its own growing technological sectors, and more allowed American investment, which China welcomes because of its tremendous debt.
Above anything else, most people take issue with the his newfound leniency with China. Trump, who’s played the “tough guy” throughout his presidency, accused China of something he called “trade rape.” After seeing that “substantial progress” was being made, however, Trump postponed the March 1 deadline so that both sides could continue cordial trade talks.
It’s going to be an awkward 2020 campaign for Trump if he fails to get the U.S. what he wants after so vehemently opposing the way China has been conducting trade with the U.S.
Thus, it’s a question of how effectively he can manipulate the deal so that it benefits the U.S.
And no matter what Trump ends up including on the deal with China, it’s vital to the U.S. economy that he negotiates away the tariffs.
Take, for example, Trump’s statement from a few days ago: “[China] is going to be selling corn, but a lot of it — a lot more than anyone thought possible.”
On any ordinary day, this would be great news for Illinois, the U.S.’s second-leading corn producer- all except for the fact that the Illinois Farm Bureau has no information on Trump’s corn plan. And soybean trade with China, one of the U.S.’s top soybean export mark, is down 40% due to tariffs that China slapped on the industry as a result of Trump’s tariffs.
And this news about corn trade with China can’t possibly make up for the lost soybean trade with China, because China isn’t even one of Illinois’ top markets. In fact, Illinois might be losing its biggest customer, Mexico, because Trump is trying to re-negotiate the North American Free Trade Agreement (NAFTA) as part of the trade talks that are going on right now.
If Trump manages to strike a deal with China in the following weeks, even days, the U.S. is avoiding the loss of hundreds of billions of dollars in the future. And while the deal may not fix any of Trump’s issues (the the trade gap between the U.S. and China is actually larger than when Trump began enacting tariffs), none of this have happened if Trump hadn’t stated that trade wars “are easy to win” and jumped head-first into this war.
One has to keep in mind that while a temporary truce has been called, there’s a chance that President Xi has been pulling Trump’s leg and has no real intentions of establishing a cordial relationship with him. And even if a deal does get passed, it hard to argue that the U.S. won the trade war because Trump managed to minimize the losses from the mess that he got himself into.
And if he doesn’t manage to strike a deal? With the recent failure to negotiate with Kim Jong Un, President Trump’s self-acclaimed dealmaking skills are at stake. More importantly, his reputation and chance at the 2020 presidency suffer because he let China slip through his fingers when he postponed the deadline.
While it looks as if this year-long dispute is about to be over, Trump will gladly acquiesce to a deal that doesn’t fully encapsulate what the U.S. wants. So the U.S. will lose ground to a rapidly advancing China, both economically and technologically.
Trump is right when he says that his deal is a ground-breaking development. This conflict has persisted through the efforts of Presidents George H. W. Bush, Bill Clinton, George W. Bush, and Barack Obama, who all failed in bargaining a deal with China.
But if Trump doesn’t navigate this deal correctly, the U.S. could lose big time to China. Now isn’t the time for patriotic antics. Instesad, strike a deal that puts an end to the trade war and obtain, at the very least, an on-paper promise from China for a stop to the theft of intellectual property.