Trump’s smoke-and-mirrors trade deal with China



Ever since President Trump launched a trade war with China in March 2018, I have been hearing foreign-policy elites say: “Trump is a terrible president. But he’s right about China, and I’m glad he’s doing something about it.” Indeed, the trade war has been one of the few Trump policies that has won support from many Democrats. I have been much more skeptical, because I did not think that Trump was focusing on the right issues or using the right approach. The paltry “phase one” deal announced last week suggests that my skepticism was justified.

When we talk about the problem with China, we are really talking about at least three discrete sets of issues. First are concerns about industrial espionage, trade barriers and other bad behavior that arguably fuel China’s economic rise at the United States’ expense. Second are concerns that China will use its growing military might to dominate East Asia and to project power around the world, displacing the United States as a global superpower. Third are human rights violations that are an affront to American values: China’s brutal repression of the Uighurs, its Orwellian surveillance state and the threat of a crackdown on Hong Kong.

Trump wasn’t really focused on any of these concerns. His obsession is the U.S. trade deficit with China, even though any reputable economist (a designation that excludes Trump trade guru Peter Navarro) would tell you that trade deficits don’t really matter. Ironically, the U.S. trade deficit spiked during Trump’s trade war.

Some of Trump’s trade advisers have more ambitious goals. They want to eliminate unfair trade practices such as forcing the transfer of intellectual property from U.S. firms in China — even though former treasury secretary Lawrence H. Summers argues that “it cannot be argued seriously that unfair Chinese trade practices have affected U.S. growth by even 0.1 percent a year.” More broadly, the China hawks want to derail the Made in China 2025 plan to compete with the United States in high-tech manufacturing sectors such as semiconductors, aerospace and electrical vehicles.

The details of the trade deal haven’t been released, but there is no reason to think it will achieve any of these goals. U.S. Trade Representative Robert E. Lighthizer claims that “China made specific commitments on intellectual property, including counterfeiting, patent and trademark issues and pharmaceutical rights,” the Wall Street Journal reported. Maybe so, but China has made such commitments in the past without fully honoring them. The really difficult issues, such as opening up China to U.S. firms, have been postponed till a second round of negotiations that few expect to go anywhere.

Trump has already rolled back some existing tariffs and canceled planned tariffs. He is maintaining tariffs on $370 billion of Chinese goods, but if a higher level of tariffs couldn’t force fundamental concessions, how will a lower level do so? Indeed, the trade war, by spurring China to develop homegrown supply chains for high-tech products, may make Beijing more resistant to U.S. pressure in the future.

The administration’s big boast is that this deal will lead to a $200 billion increase in U.S. exports to China over two years. (In 2018, U.S. exports to China totaled $179.3 billion.) But Chinese officials have not confirmed any such commitment, and trade experts are skeptical.

Lighthizer claims China will buy $40 billion to $50 billion in U.S. agricultural products annually — more than double the level in 2017 ($19.6 billion). Joe Glauber, a former chief economist at the U.S. Agriculture Department, notes that Chinese soybean imports are down 10 percent from 2017 levels — and soybeans account for nearly two-thirds of U.S. farm exports to China. He concludes that “it will be very hard” to get to $40 billion, much less $50 billion. Are you surprised? This would not be the first time that Trump has promised that China would make massive purchases of U.S. agricultural goods that never materialized.

While the benefits of the trade war are speculative, its costs are real: The Tax Foundation estimates that Trump’s tariffs have cost Americans more than $88 billion so far, making this one of the biggest tax hikes in history. To cushion the blow, the administration gave $28 billion to farmers — twice the cost of the 2009 auto industry bailout.

Waging a trade war is like hitting your head against a wall; it feels good when you stop. But most trade experts agree with my Council on Foreign Relations colleague Edward Alden when he says: “It’s hard to see this China deal as the vindication of the president’s tactics. It’s a pretty small deal, coming at a pretty high cost.”

Indeed, the New York Times reports that Chinese hard-liners are “jubilant and even incredulous” that they have gotten such a good deal. They have good cause to cheer because the real issues with China — from trade barriers to militarism in the South China Sea to human rights violations — remain unaddressed. Trump would rather trumpet “our GREAT new deal with China” than take serious action to address the real challenges from China.