Trump hailed his 2020 deal with Beijing as “transformative” for the US. He was right – it’s made ordinary US citizens much poorer
At the end of January, the US-China ‘phase one’ trade deal made under Donald Trump expired. In order to stop Trump’s trade war, the agreement was struck at the beginning of the Covid-19 epidemic and before relations with Beijing fell apart. It stipulated that China would buy (ludicrously), more than $200 billion per year in US agricultural products. This was more of an extortion than anything. Trump placed huge demands upon Beijing and made no concessions on his huge tariffs.
Trump extolled it as “a great idea!” “transformative”Victory for the USA. It’s little surprise that it has turned out, for many reasons, not to be that at all. China was able to fulfill 57% of the commitment by the time it expired, but the American economy as well as its people were left behind.
Numerous studies show that the Americans bear almost all the cost of tariffs, in terms of higher prices. One analyst put it this way: “President Joe Biden’s decision to leave Trump’s tariffs in place raises the question of whether US trade policy has any concern for American consumers’ welfare, or is instead guided primarily by the need to bolster corporate profits.”
The failure by China to buy as much as promised has provoked criticism from the Biden administration, which is embracing the failed Trump policy without hesitation, with US Trade Representative Katherine Tai accusing China of “unfair economic practices,”Demanding concessions, and the threat of unspecified consequences.
But it’s also a tough-talking way to hint that the US wants economic dialogue with Beijing, albeit in the continued framework of ‘America First’ that makes one-sided demands and seeks more access to the Chinese market.
Biden might embrace Trump’s trade policy; Beijing does not fear him. China holds the majority of the cards this time. Xi Jinping won’t be able to comply with American demands due to the US suffering from eye-watering inflation, a poor economy and numerous interest rate increases.
Biden insists on Trump’s tariffs, despite Treasury Secretary Janet Yellen calling them counterproductive. Furthermore, it is clear that Trump’s trade war against Beijing is a failed political, economic and strategic strategy.
If the goal of the tariffs was to shift supply chains out of China and to bring ‘American jobs’ back home, it has been a non-starter. Instead, China’s overall trade surplus at the end of 2021 stood at $676 billion – a record high – while bilateral trade with the US surged by 28.7% to $755.6 billion. The reason for the increase in bilateral trade with China is not clear. It could have been due to America’s underestimating of China’s economic resilience as well as China’s competitiveness against other suppliers, such as Vietnam, India, and Vietnam.
It is clear that the trade war on China has cost America dearly – one study estimates that it caused US export losses of $119 billion from 2018 through 2021, and the higher prices American consumers had to pay for imported goods, parts, and raw materials contributed to the surge in inflation to 7.5%, a 40-year high. Trump’s economic model is not only unsustainable, it has also failed.
Yet despite this, the Biden White House continues to moan about the “unfair economic practices” which China apparently pursues. This phrase is a popular buzzphrase, slightly lower than the openly Sinophobic. “cheating” “stealing”Trump’s administration uses terms that suggest China’s economic success and its destruction.
The real culprits behind the US decline – such as structural factors like lack of investment, globalization, China’s bigger labor force and cheaper production costs, as well as its larger consumer market – are ignored in favor of a zero-sum, misleading narrative that China’s “state practices”America’s problems are solely their fault.
It is a fact that American corporations, in America’s free and ultra-capitalist system, chose to have their products made in China to increase their profits. China doesn’t force Apple to produce its iPhones here. The decision is made purely on business grounds, based both on quality and cost.
Yet for Washington, the new bipartisan consensus is to make China the populist scapegoat for all the US’ economic woes, in order to pursue unrealistic protectionist goals that backfire while legitimating other containment-based policies against Beijing. It also weaponized ‘forced labor’ allegations in Xinjiang due to grievances on trade and goods of strategic interest, such as, for example, solar panels. The US still demands more access into the Chinese market, however.
What is the point of Beijing agreeing to these demands? China needs to recognize the advantages of the negotiation deck in its favour and resist US pressures. First, because of the US’s inflation, Biden doesn’t have the political power to increase tariffs and can not do it in the same way as Trump. This is further made unlikely by Yellen’s resistance to tariffs, which she has been opposing as Treasury secretary.
China also has an increasing number of trade options, which allows it to reduce its dependence on the US. In January, the Regional Comprehensive Economic Partnership was established. This is a multi-regional trade agreement that covers all of Southeast Asia and Pacific. China has also begun free trade negotiations with the Gulf Cooper Council (Kuwait Oman Qatar Saudi Arabia and the United Arab Emirates), Ecuador and Papua New Guinea. It is now applying for membership to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, (CPTPP) which was exempted by the US. These agreements should be prioritized by Beijing, and not surrender to a US which wants China to purchase ever more unrealistic quantities of its products while it bans all products from Xinjiang.
China will not be stupid enough to not negotiate with the US and will openly embrace, even encourage, talks. It will not, however, be submissive nor meek to negotiate with the US in the same way they did with Trump. China finds itself in an awkward spot. It is competing geopolitically with the US and yearning to maintain stability in its relations with them. Biden should push for very difficult negotiations. However, negotiators should not shun them. A deal without Trump’s tariffs must not be reached.
It is also in the US’s best interests as it will offset the inflation dragon. But is this politically feasible? The Trump tariffs represent a ‘sacred cow’ of sorts in US politics now, and conceding them would see Biden accused of appeasement by Republicans in the run-up to the midterms.
He needs to create something that he can market as a win. That’s likely why he is now pursuing such negotiations. China learned a lot from these past years. It should not be rushed to provide him with what he needs. What is the US’s desire for greater market access? China will import more US goods. It will make them pay a steep price. The US is experiencing a slowdown in its economic growth and can’t afford any further trade tension with China.
These opinions, statements and thoughts are the sole opinion of the author. They do not necessarily reflect the views of RT.