Trump hailed his 2020 deal with Beijing as “transformative” for the United States. He was right – it made ordinary American citizens much poorer
At the end of January, the “phase one” trade agreement between the United States and China concluded under Donald Trump expired. The deal, reached in January 2020 at the very start of the Covid-19 pandemic and before ties with Beijing fell off a cliff, stipulated that China would buy (ridiculously) more than $200 billion worth of agricultural products from United States per year to end Trump’s trade war. It looked more like a one-sided extortion, imposing huge demands on Beijing with very little compromise on the huge tariffs it had imposed on them.
Trump trumpeted it as a “transformer” victory for the United States. Not surprisingly, this turned out, for many reasons, not to be that at all. When it expired, China had only met 57% of its commitment, and the losers turned out to be the US economy and its people.
Various studies have shown that Americans have borne almost the entire cost of these tariffs in the form of higher prices. As one analyst put it: “President Joe Biden’s decision to leave Trump’s tariffs in place raises the question of whether US trade policy is concerned with the welfare of American consumers, or instead is driven primarily by the need to bolster corporate profits. “
China’s failure to buy as much as promised has drawn criticism from the Biden administration, which is unhesitatingly embracing Trump’s failed policy, with U.S. Trade Representative Katherine Tai accusing China of “unfair economic practices, demanding concessions and threatening unspecified consequences.
But it’s also a harsh way of implying that the United States wants economic dialogue with Beijing, albeit within the ongoing “America First” framework that makes unilateral demands and seeks more access to the world. Chinese market.
Biden could adopt Trump’s trade policies; however, he is not Trump, nor does Beijing fear him as such. This time, China holds all the cards. And with the US dogged by soaring inflation, a lackluster economy and multiple interest rate hikes underway, Xi Jinping is not going to pander to US demands so easily.
Biden is stubbornly sticking to Trump’s tariffs, even though Treasury Secretary Janet Yellen herself calls them counterproductive and there is no doubt that the trade war with Beijing has been a political, economic and strategic failure.
If the purpose of the tariffs was to move supply chains out of China and bring “American jobs” home, it didn’t work. Instead, China’s overall trade surplus at the end of 2021 stood at $676 billion – a record high – while two-way trade with the United States jumped 28.7% to 755. .6 billion. There are a number of reasons for this, including America having underestimated China’s trade resilience, as well as its competitiveness against other suppliers such as Vietnam and India.
It’s clear that the trade war against China has cost America dearly – a study estimates it caused US export losses of $119 billion from 2018 to 2021, and higher prices than consumers Americans had to pay for imported goods, parts and raw materials contributed to inflation soaring to 7.5%, a 40-year high. Trump’s model has not only failed, it is also unsustainable.
Yet despite this, the Biden White House continues to groan about the “unfair economic practiceswhich China is apparently pursuing. It’s just a populist buzzword, slightly toned down by the openly Sinophobic rhetoric “Cheating” and “flight” terms used by the Trump administration, which have been used to imply that China’s economic success is a conspiracy against America and is for its own undoing.
The real culprits of the decline of the United States – such as structural factors like lack of investment, globalization, the increase in the workforce and the lower costs of production in China, as well as its market of broader consumption – are being ignored in favor of a misleading, zero-sum narrative that China “state practices” are solely responsible for America’s misfortunes.
The reality is that American companies, as part of America’s ultra-capitalist and liberal market system, have voluntarily chosen to have their products made in China in order to make more money. Apple isn’t obligated by China to manufacture its iPhones there, is it? This is a purely business decision based on cost and quality factors.
Yet for Washington, the new bipartisan consensus is to make China the populist scapegoat for all of America’s economic woes, in order to pursue unrealistic protectionist goals that backfire on Beijing while legitimizing other policies based on containment. It has also weaponized allegations of “forced labor” in Xinjiang over grievances over trade and goods of strategic interest, such as, for example, solar panels. But despite all this, the United States continues to demand better access to the Chinese market.
Why should Beijing accept this? Rather than give in to US demands, China should realize that the negotiating cards are in its favor. First, the inflation situation in the United States means that Biden has little political space to weaponize more tariffs, and cannot do so in Trump’s utterly destructive way. Yellen’s opposition to tariffs as they are, as Secretary of the Treasury, makes this even more unlikely.
Second, China has a growing number of trade alternatives that allow it to become less dependent on the United States. The Regional Comprehensive Economic Partnership (RCEP), a mega trade deal across Southeast Asia and the Pacific, kicked off in January. Similarly, China has ongoing free trade negotiations with the Gulf Cooperation Council (Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates), Ecuador and Papua New Guinea, and asks adhere to the Global and Progressive Agreement for Transport. – Pacific Partnership (CPTPP), from which the United States has excluded itself. Beijing should prioritize these deals, not capitulate to a US that simply wants China to buy increasingly unrealistic amounts of its goods while blanket bans on Xinjiang products.
China is not stupid enough not to negotiate with the United States and will publicly accept and even encourage talks. However, neither will he be submissive or docile in doing so as they arguably have been with Trump. China finds itself in a complicated situation, competing geopolitically with the United States while striving for stability in its relations with it and seeking to preserve the economic ties that contribute to its own development. Negotiations should not be avoided, but Biden should be pressed for a very tough negotiation, and any agreement that does not involve the removal of Trump tariffs should be a non-starter.
This is also in the interests of the United States, as it will help counteract the dragon of inflation, but is it politically possible? Trump’s tariffs now represent something of a “sacred cow” in American politics, and conceding them would see Biden accused of appeasement by Republicans ahead of the midterm elections.
So he needs to shape something he can sell as a win, and that’s probably why he’s getting into such negotiations now. But if China has learned anything from the past two years, it shouldn’t be to rush to give it what it wants. The United States wants more market access? Will China import more American products? Make them pay full price. America’s economic boom is running out of steam, and it ultimately cannot afford another trade showdown with China.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.