There are unconfirmed reports that Donald Trump is about to suspend the tariffs he imposed on Chinese imports in the hopes that China will make further concessions that will lead to a final settlement of the trade dispute. Of course, such rumors will remain speculation until a final agreement is announced and signed since Trump often changes his mind, as he did when he backed out of a budget agreement at the last moment in December triggering the government shutdown.
There are compelling reasons for Trump to end the trade war with China. Complex production chains mean that many American industries depend on Chinese components. When tariffs were imposed costs for US manufacturers increased, leaving US firms at a competitive disadvantage to foreign rivals. The longer the trade war continues the greater the number of US manufacturers that will shift production abroad to avoid tariffs. Tariffs also raised prices paid by American consumers.
We don’t know if China has offered concessions that convinced Trump it was time to make a deal. The trade war is costly for China and the Chinese government believes it must deliver continued high levels of economic growth to retain legitimacy. While China has the currency reserves to subsidize manufacturers for months or even years as they try to outlast the US in this trade war, many Chinese firms already are overextended and Chinese banks are carrying huge loans on their books that will never be repaid. In the long run it will be disastrous for China’s government to pile on yet more uncollectable loans.
If there is a final deal it likely will be similar to the outcome of Trump’s challenge to NAFTA. The U.S.-Mexico-Canada Agreement Trump is almost identical to NAFTA. Nevertheless, Trump touted the new deal as a great victory for the U.S. and evidence of his negotiating prowess. Perhaps he really believes that. In any case, he can hope that the complexities of such trade deals will make it hard for voters to figure out if Trump is telling the truth before the next election. No doubt Trump will proclaim an agreement with China as a big success for America and a deal that only a tough and smart negotiator like him could deliver.
Unfortunately, Trump lacks the detailed knowledge, and is unwilling to make the effort to acquire it, that is needed to develop a consistent military or trade policy in relation to China or with any other country. He, even more than previous presidents, depends on his appointees, many of whom do not share his goals, to negotiate treaties or to determine military deployments and terms of engagement. In trade, that means Trump is more likely to end up with a trade agreement that, like the NAFTA replacement, is favorable to China. In military affairs, Trump probably will be a passive actor, having friendly meetings with Chinese president Xi Jinping while the Pentagon continues to deploy ships and planes along China’s borders and engaging in provocative maneuvers that, even though they won’t lead to war, will make it hard for China to reach a general accommodation with the US.