Will Trump End His Trade War With China?

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.

How Will Trump’s Trade Wars End?
Richard Lachmann
Trump is facing similar and even more intense pressure to end the trade war with China. He reportedly is spooked by the recent drop in U.S. stock markets and worries, with ample justification, that if there is a recession he will lose in 2020. As with NAFTA, he is sending his team of ideologues, political hacks and crooks to face the seasoned experts of other countries.

Investors are aware of the true costs and effects of tariffs and that has driven the US stock market down. Trump took great pride in the run-up of US stocks in the first year of his presidency and so as the market dropped in 2018 he was tempted to end the trade war to once again boost stocks. Republicans in Congress and Trump himself depend on donations from capitalists to fund their campaigns and they are in danger of losing support if the trade war continues to cost those businessmen money. 

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.

Benefits of the US-China Trade War
Feng Shaolei
Compared with many world powers, including Russia, China still needs to learn and accumulate experience in dealing with global issues. In this sense, this trade war also teaches the Chinese a very good lesson.

An end to the trade war would remove what for Trump is the biggest irritant in US-China relations. While the Pentagon and most of the foreign policy establishment see China as America’s greatest geopolitical rival, Trump so far has taken a dramatically less aggressive military stance toward other countries than his predecessors. Almost all the statements from the Trump Administration that promise a tough stance against China come from his appointees and not Trump himself. Trump recognizes he needs China if he wants to realize a peace treaty with North Korea. 

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. 

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.