Trump Still Unwilling To Make “Tough Trade Offs” With China After Washington Talks

Two days of intense trade talks in Washington have yielded some progress…but not nearly as much as the Trump administration has let on. Looking past US Trade Rep Robert Lighthizer’s post-hoc press conference, where he revealed that, during two days of intense discussions, the two sides had focused on US demands for structural reforms by Beijing (including ending the forced transfer of technology from US companies and reining in the use of industrial subsidies, two of the US’s biggest asks), as well as the requirements for enforcement. But it doesn’t appear that the US or China were in the mood to make any new commitments.

No specific concessions had been made by Beijing. Instead, a US delegation led by Lighthizer and Mnuchin are planning to travel to Beijing after the Chinese New Year for another round of talks. And after that, President Trump – the “closer” in chief himself – is expected to meet Xi on the southern island of Hainan after the second summit with North Korean leader Kim Jong Un to seal the deal with President Xi.


Trump told reporters in the Oval Office that “I think that probably the final deal will be made, if it’s made, between myself and President Xi.” But he offered little in the way of anything concrete to justify why investors should be optimistic now. As China’s Xinhua news agency reported, the two sides had “clarified the timetable and roadmap for the next consultation” after holding “frank, concrete and constructive” discussions on issues like technology transfers and IP protections. But though the two sides had “clarified the roadmap” toward a deal, it doesn’t appear that any actual progress was made, despite Xi telling Trump in a letter delivered by the Chinese delegation that the “intensive consultations” had yielded “good progress,” according to Bloomberg.

And the US has continued to insist that if there isn’t a deal by March 1, tariffs on $200 billion in Chinese goods will increase from 10% to 25%.


“I hope our two sides will continue to work with mutual respect and win-win co-operation,” the Chinese president wrote, adding that an agreement would “send a positive signal to our two peoples and the broader international community.” So far, China has offered to boost its purchases of soybeans and discuss improving market access to international investors – but neither of these offers is anything new.

But as the Financial Times points out, China remains unwilling to reduce state support for its economy in any way that could impact its ability to compete with the US. So whatever progress was made on this key US demand, it was, apparently, superficial, at best. Setting aside the administration’s optimistic tone, Trump’s team is apparently leaning on the notion that the US has the upper hand because the Communist Party would be unwilling to rock the boat at a time when the economy is slowing. But the US is facing pressures of its own – pressures that have been exacerbated by the government shutdown – and nothing about China’s behavior so far suggests they’re leaning toward caving.

Plus, Beijing’s simmering outrage over the US’s perceived persecution of Huawei remains a major complication. 

But the White House is facing pressure of its own – in the form of the hit taken by the US economy this month from the partial government shutdown and Mr Trump’s sensitivity to adverse movements in equity markets.  Politically, Mr Trump is striving to fulfil one of his key 2016 campaign pledges – to reset trade relations with China. But any agreement that is seen as weak or inconclusive would expose him to attacks from Democratic rivals. 

The chance of a big breakthrough this week in the trade talks was relatively low, after Beijing reacted with outrage to Monday’s indictment of Huawei, the Chinese telecoms equipment maker, on criminal charges it stole US technology and violated US sanctions. But US officials said there was no evidence it adversely affected the negotiations. 

A new summit between Mr Trump and Mr Xi would follow their steak dinner in Buenos Aires on December 1, just after the G20 summit in the Argentine capital. That meeting resulted in a commercial ceasefire between the US and China and avoided a tariff escalation that was originally scheduled for January 1.

Speaking with the FT, a professor of economics at Syracuse University named Mary Lovely highlighted what appears to be the biggest obstacle to a deal: The Trump administration remains unwilling to make big concessions.

Mary Lovely, a professor of economics at Syracuse University and a senior fellow at the Peterson Institute for International Economics, a think-tank, said it was still unclear whether the US was prepared to make “tough trade-offs” with the Chinese in the final stretch.

This was perhaps best encapsulated by Trump’s hint (a suggestion he later walked back) that the talks could be extended past the March 1 deadline.

“This isn’t going to be a small deal with China,” Trump said. “This is either going to be a big deal or it’s going to be a deal that we’ll just postpone for a while.”

So if the administration doesn’t have a change of heart, it would be easier – and more politically expedient – for Trump to continue hailing incremental “progress” while putting off the “real” breakthroughs until the next meeting…and the next meeting…and the next meeting.

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