Original Trump Goal In China Trade Talks Abandoned

Have U.S.-China trade talks downsized to focus on solving Donald Trump’s political problems rather than addressing the original stated objectives of the trade conflict? The answer tells us whether a deal is obtainable and what such a deal would look like.

On October 3, 2019, Trump ignited a new controversy when he stood on the White House lawn and said, “China should start an investigation into the Bidens, because what happened in China is just about as bad as what happened with – with Ukraine.” The Wall Street Journal reported, “Mr. Trump’s call for China to investigate Mr. Biden and his son marked the first time he invoked Beijing – with which the U.S. is involved in tense trade negotiations – in his quest for a probe into his potential 2020 opponent.”

While Trump may be seeking to solve one political problem (i.e., trailing Biden in early opinion polls), analysts believe the trade talks may focus on solving another, more specific, political problem – the economic damage Trump’s tariffs and China’s retaliation have caused U.S. farmers.

“Losing the world’s most populous country as an export market has been a major blow to the [U.S.] agriculture industry,” reports the New York Times. “Total American agricultural exports to China were $24 billion in 2014 and fell to $9.1 billion last year, according to the American Farm Bureau.” Between 2018 and 2019, U.S. exports of soybeans to China declined nearly 60%. Moreover, a National Foundation for American Policy (NFAP) study concluded, “When adding the tariffs in effect and the tariffs set to go into effect by the end of 2019 . . . the tariffs will cost the average household $2,031 per year.”

After 18 months, it may be good to remember the answer to a simple question: What was the initial goal of the Trump administration’s talks and actions with China? “The original Section 301 indictment the U.S. Trade Representative issued in March 2018 criticized China for intellectual property theft, forced technology transfers, and the buying up of U.S. technology companies,” said Daniel Griswold, a senior research fellow at the Mercatus Center at George Mason University, in an interview. “The tariffs the administration started imposing in the summer of 2018 were supposed to bring China to the table to negotiate an agreement that would curb those practices.”

Bryan Riley, director of the National Taxpayers Union's Free Trade Initiative, agrees with Griswold. “The initial stated objective was to investigate China's practices regarding technology transfer, intellectual property and innovation,” Riley told me in an interview. “Some have suggested that the real purpose was to come up with a justification to impose tariffs. In any case, the result has been more tariffs and no change in China's practices.”

What is the Trump administration trying to accomplish in current trade talks with China? “It’s not clear what the Trump administration’s ultimate objective is with China,” said Griswold. “A grand deal to fix the problems described in the Section 301 report seems more remote than it was six months or a year ago. The president says he likes the tariffs and that Americans would be better off without any trade with China.”

“Initially many people were willing to give President Trump's approach time, but as time goes by with no resolution, the costs continue to mount,” said Bryan Riley. “Both sides would benefit from a face-saving deal that reduces the new barriers that have been imposed.”

Is a major agreement still possible? “A grand deal with China has always been a long shot,” according to Griswold. “The Trump administration is demanding fundamental changes in China’s economic model, which would be hard for President Xi to agree to without losing face. A more modest deal might be doable involving some incremental economic reforms in China and a rollback of some of the tariffs imposed by both sides. That might allow President Trump to declare victory and at the same time remove the uncertainty that is hanging over the markets.”

Even if a modest deal is reached, it may come too late. “It will still take time for U.S. farmers to reclaim market share and for businesses to reconfigure their supply chains,” said Daniel Griswold. “Even if it gets largely resolved soon, the damage from the tariff war may linger for years.”

Have U.S.-China trade talks downsized to focus on solving Donald Trump’s political problems rather than addressing the original stated objectives of the trade conflict? The answer tells us whether a deal is obtainable and what such a deal would look like.

On October 3, 2019, Trump ignited a new controversy when he stood on the White House lawn and said, “China should start an investigation into the Bidens, because what happened in China is just about as bad as what happened with – with Ukraine.” The Wall Street Journal reported, “Mr. Trump’s call for China to investigate Mr. Biden and his son marked the first time he invoked Beijing – with which the U.S. is involved in tense trade negotiations – in his quest for a probe into his potential 2020 opponent.”

While Trump may be seeking to solve one political problem (i.e., trailing Biden in early opinion polls), analysts believe the trade talks may focus on solving another, more specific, political problem – the economic damage Trump’s tariffs and China’s retaliation have caused U.S. farmers.

“Losing the world’s most populous country as an export market has been a major blow to the [U.S.] agriculture industry,” reports the New York Times. “Total American agricultural exports to China were $24 billion in 2014 and fell to $9.1 billion last year, according to the American Farm Bureau.” Between 2018 and 2019, U.S. exports of soybeans to China declined nearly 60%. Moreover, a National Foundation for American Policy (NFAP) study concluded, “When adding the tariffs in effect and the tariffs set to go into effect by the end of 2019 . . . the tariffs will cost the average household $2,031 per year.”

After 18 months, it may be good to remember the answer to a simple question: What was the initial goal of the Trump administration’s talks and actions with China? “The original Section 301 indictment the U.S. Trade Representative issued in March 2018 criticized China for intellectual property theft, forced technology transfers, and the buying up of U.S. technology companies,” said Daniel Griswold, a senior research fellow at the Mercatus Center at George Mason University, in an interview. “The tariffs the administration started imposing in the summer of 2018 were supposed to bring China to the table to negotiate an agreement that would curb those practices.”

Bryan Riley, director of the National Taxpayers Union's Free Trade Initiative, agrees with Griswold. “The initial stated objective was to investigate China's practices regarding technology transfer, intellectual property and innovation,” Riley told me in an interview. “Some have suggested that the real purpose was to come up with a justification to impose tariffs. In any case, the result has been more tariffs and no change in China's practices.”

What is the Trump administration trying to accomplish in current trade talks with China? “It’s not clear what the Trump administration’s ultimate objective is with China,” said Griswold. “A grand deal to fix the problems described in the Section 301 report seems more remote than it was six months or a year ago. The president says he likes the tariffs and that Americans would be better off without any trade with China.”

“Initially many people were willing to give President Trump's approach time, but as time goes by with no resolution, the costs continue to mount,” said Bryan Riley. “Both sides would benefit from a face-saving deal that reduces the new barriers that have been imposed.”

Is a major agreement still possible? “A grand deal with China has always been a long shot,” according to Griswold. “The Trump administration is demanding fundamental changes in China’s economic model, which would be hard for President Xi to agree to without losing face. A more modest deal might be doable involving some incremental economic reforms in China and a rollback of some of the tariffs imposed by both sides. That might allow President Trump to declare victory and at the same time remove the uncertainty that is hanging over the markets.”

Even if a modest deal is reached, it may come too late. “It will still take time for U.S. farmers to reclaim market share and for businesses to reconfigure their supply chains,” said Daniel Griswold. “Even if it gets largely resolved soon, the damage from the tariff war may linger for years.”