That Truce over China Trade

Terry H. Schwadron

Dec. 3, 2018

So, after all the bluster by President Trump in his China stare down, Trump blinked.

Yes, the threat of much wider tariffs still looms for a delayed date three months out, but the fact is that the insistent America First president just decided to put China First. Or America second.

Indeed, all the difficult questions were merely put to the side over a steak dinner for hope-for resolution on the same open questions that have failed up to now in renewed negotiations between U.S. and China trade delegates.

It’s not that I particularly disagree with this switch in policy. Indeed, there is plenty of evidence to say that the building crisis emanating from the imposition of tariffs on lots of Chinese goods has interrupted American manufacturing supply lines, forced jitters in the American goods and finance markets, has led inevitably to more layoffs than the White House would have wanted to predict. The idea that yet wider tariffs would somehow force China to stop its various bad behaviors and vastly boosted the U.S. economy without also causing worldwide financial ripples was clearly wrong-headed from the start.

But this president, who relies on personal contacts for international agreements, never acknowledges error in deed or intention, and so, while the Chinese merely thanked the United States for ceding ground (Chinese state media did not acknowledge more U.S. purchases or new deadline), our belligerent president was once again mounting his jousting steed for reporters on the plane back home from the G20 meetings in Argentina.

As a nice gesture, the Chinese leader agreed to control the manufacture and distribution of fentanyl more closely.

Let me be quite clear: This is not comment on whether this is good policy. It is comment on Trump promises and Trump deliveries, the exact message he keeps hammering. If the president insists on bucking economic and political norms, we at least can hold him responsible for carrying out what he says he wants to do. Instead, we see a Trump who declares everything in sight a victory.

Of cancelling his own Jan. 1 deadline for China in return for the repeated Chinese promise to buy undefined more American goods, Trump said, “This was an amazing and productive meeting with unlimited possibilities for both the United States and China. It is my great honor to be working with President Xi.”

Just declare victory and move on apparently is the Trump order of march.

And so, he did, using the same setting to slap Democrats a couple of times and make ratification of the updated trade arrangement with Mexico and Canada into a contentious matter rather than an document of general agreement. “Even as Trump appeared to soften his approach to China, he talked toughon a separate trade front. Aboard Air Force One, the president told reporters that he would formally terminate the 24-year-old North American Free Trade Agreement in a political gamble designed to force wavering lawmakers to back his replacement treaty, dubbed the United States-Mexico-Canada Agreement, or USMCA,” said The Washington Post. (Mexico and Canada call the agreement other names that put their countries first.)

The announcement, a day after the ceremonial signing of the three-party pact in Argentina seemed intended to force House Democrats to enact a revised version of the pact despite concerns that it fails to protect American workers. If the president follows through on his threat, congressional leaders will have six months to pass the measure. The agreement has been losing support in recent days as Democratic lawmakers say that there is nothing in the agreement to keep companies from continuing to move jobs to Mexico — seemingly a goal for the president as well.

If no deal can be reached, both versions of the treaty would be void, which would result in far more restrictive trade that could have a severe impact on industry and agriculture in all three nations, economists have warned.

Nancy Pelosi, the House Democratic leader who is likely to be elected speaker, cast doubt on the likelihood that the deal could be passed without significant new assurances from Mexico that labor standards in the agreement will be strictly enforced. The Times said that Trump has grown increasingly frustrated with Democrats, telling people in his orbit that he believes they would rather turn their backs on a “great deal” than see him achieve one of his top campaign goals, according to a person who has spoken to the president in the past week.

These type of trade fights are undermining a weakening global economy. Christine Lagarde, managing director of the International Monetary Fund, who said that “trade tensions have begun to have a negative effect” and are increasing the risk that growth will disappoint.

So too is the White House performance in office.

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