Although the two sides have made many commitments, the “first-stage” US-China trade agreement has not been able to resolve the root cause of the trade war.
US President Donald Trump and Chinese officials say the bilateral agreement has just been the beginning of a new relationship between the world’s two largest economies. Future agreements will turn China into a better trading partner, the White House said. Beijing meanwhile claimed to have seen the prospect of a trade war ending.
However, experts are not too optimistic. They said that instead of repairing the relationship, the trade agreement signed by President Trump and Chinese Deputy Prime Minister Liu He on January 15 has the potential to cause the United States and China to be further apart.
Chinese Deputy Prime Minister Liu He (sitting on the left) and US President Donald Trump (on the right) signed a “first phase” trade deal on January 15 at the White House. Image: New York Times.
The deal removed some of the U.S. tariff barriers imposed on Chinese goods over the past two years. In return, China pledged to buy US $ 200 billion of US cereals, pork, airplanes, industrial equipment and other goods over the next two years.
The agreement also requires China to further open its financial markets and protect American technology and brands, and establish a forum for the two sides to debate different points of view.
But what this partial agreement did not solve was the root cause of the trade war. The agreement does not cover the Chinese government’s subsidies on domestic industries and their strict control over important economic levers. The deal also retains most of the Trump tariffs on $ 360 billion of Chinese goods.
Addressing these issues may take years. The prospect of a second deal is still unclear. Trump has said he wants to wait until after the November 2020 election to include the “second phase” deal.
Until then, US consumers and companies will still buy fewer goods from China. For its part, the Chinese government will continue to look for customers elsewhere. Therefore, the US-China relationship, the main driver of the global economy for decades, will even become weaker.
“The trade war has created structural effects that could have a profound impact on Chinese imports of goods in the near future,” said Eswar Prasad, an economist specializing in Chinese studies. at Cornell University, comment.
Unpredictable situations can change every scenario, especially for Trump, who has torn up many trade deals. An economic downturn could bring one or both sides back to the negotiating table, and Americans may also choose a less tough new leader in trade in November.
But so far, both countries have shown that they are willing to suffer economic strikes. The US economy, job market and stock market have been growing since the trade war broke out nearly two years ago, but many wonder how long this will last. Politically, many Democrats have urged Trump to be tougher than to be soft on trade with China.
In China, trade wars are only a factor in slowing the economy. Beijing seems satisfied with its ability to handle problems.
In recent weeks, advisers for the Chinese government have been focusing on the steps Beijing can take, such as supporting the job market or finding new trading partners, instead of discussing. about steps they can’t take.
Despite a drop in exports from China to the US, their goods are still heavily consumed in other countries, especially in poorer countries. Beijing in recent months is actively trying to find more markets.
On the other hand, complaining about a trade deal can make China look weak, a position it cannot accept.
In the “phase one” agreement, China also created a “way out” in its commitment to buy US $ 200 billion of US goods. According to the agreement, the purchase must be based on “real trade considerations”, meaning that China can still object to the selling price and related terms set by the US.
The agreement shows China cannot be bullied and that the US “is learning to live with China, accepting China on its own terms,” said Andy Mok, trade and geopolitical expert at the Center. China and Globalization, a research institute in Beijing, commented.
Chinese officials are quite humble. In recent months, even before the two sides signed a trade agreement, the government has relaxed restrictions on foreign companies in the automotive and financial industries, and has pledged to prevent Chinese companies. Quoc compels foreign partners to reveal sensitive trade secrets.
However, in terms of the government’s support and control of the economy, Beijing is still very tough.
The Trump administration and U.S. companies have long complained about China’s unfair financial support for domestic industries to compete directly with Western companies. Beijing has discreetly carried out this effort in recent years due to increased trade tensions.
But for now, China has been “less cautious”, according to experts. In the early stages of the trade war, President Xi Jinping visited a semiconductor company to show support for the industry where China put a lot of subsidies on usurping the West.
New data shows that China has stepped up its Belt and Road Initiative, a global infrastructure-building plan initiated by Beijing to serve the export industry.
The price of the tough stance China pursues is a global supply chain rearrangement. Foreign companies have previously kept manufacturing facilities in China despite rising wages and other costs over the past decade.
However, the trade war broke that trend, when many businesses started moving their supply chains out of China to avoid taxes. In November 2019, exports from China to the US dropped by a fifth compared to the previous year. Exports to the US currently account for only 4% of China’s economy.
“This is a shock, a motivation to make people move,” said Ker Gibbs, president of the American Chamber of Commerce in Shanghai. This satisfied President Trump, who has long complained about the $ 320 billion trade deficit between the US and China.
But that does not mean that spillage to China in the past two decades will return to the US. High labor costs, strict regulations and a long shortage of skilled workers in the US have made most multinational companies hesitate to relocate their production facilities to the country.
Even when the two sides sit down to discuss new concessions, having a complete trade deal is still extremely difficult and time consuming. The deal on January 15 came after more than two years of negotiations with multiple interruptions. Agreements such as the North American Free Trade Agreement between the United States, Mexico and Canada take even longer. The longer it takes, the longer the United States and China will be economically apart.
If the trade war didn’t break out, the US could have bought up to $ 550 billion of goods from China or more in the past year, according to Brad Setser, an economist at the Council on Foreign Relations in New York. Even when the “first phase” trade agreement has been signed, US imports from China this year are likely to stop at around US $ 400 billion.
“The tariff barrier obviously has a tremendous impact,” he stressed.
Vu Hoang (Follow New York Times)