United States Puts Trade War On Hold

THE US-CHINA trade war is on hold. Official. Or official, at least until the US president tweets that it is back on, or was never off or is over.

US Treasury Secretary Steve Mnuchin says the Trump administration will not, for now, impose tariffs on up to $150 billion in Chinese imports for alleged violations of US American intellectual property and unfair trade practices. The rationale, according to Mnuchin, who was speaking on one of the United States’ Sunday morning TV talk shows, is the progress made in last week’s trade talks towards a ‘framework’ for cutting the $375 billion merchandise trade surplus with the United States.

High-level US trade officials met their opposite numbers from Beijing in Washington last Thursday and Friday, which was followed by a communique that vowed that neither side would launch a trade war against the other.

China said it would buy more agricultural and energy products from the US as part of a substantial cut in its trade surplus with the United States, which will include still-to-be-discussed purchases of US manufactures and services.

Both of those, and particularly the latter, require structural reforms on Beijing’s part likely to come later rather than sooner.

Beijing said it would drop it anti-dumping investigation into US sorghum, but that at best will protect existing US exports now at risk, rather than create new business in itself. Also, while the US has plenty of energy, particularly liquefied natural gas, it could sell China it would have to build distribution infrastructure to deliver it. Privately, US trade officials say it could take three to five years to double US energy exports to China.

Sales of agricultural commodities could be ramped up within a crop season, however. China bought $19.6 billion-worth of US farm produce in 2017, making it US farmers’ second largest foreign market. The United States is hoping for a 40% increase this year. If that comes about, there will be only another $188 billion to go to the $200 billion cut in the trade surplus that the United States reportedly seeks.

Beijing also promised to address US concerns about intellectual property protections (although that is pushing against an open door given that Chinese firms have an increasing amount of intellectual property of their own to protect these days).

Whatever short-term concessions might be made to provide Trump with an arithmetical win on the trade deficit, Beijing will do nothing that compromises its Made in China 2025 industrial policy, which is the real war.

Meanwhile, our man in Washington sends word that President Donald Trump’s U-turn on sanctions against telecoms equipment maker ZTE got a rebuff from the US Congress last week.

The House Appropriations Committee snuck into an appropriations bill an amendment that forbids the Commerce Department from changing the sanctions on ZTE that it imposed last month for trading with Iran and North Korea.

The inclusion of a seven-year ban on US companies selling components to ZTE has led the company to cease operations, and it was that ban that Trump, surprisingly, a week ago ordered the Commerce Department to rescind and replace with a less onerous alternative.

There is a long distance between an amendment being passed in committee and making it into law, a distance few such amendments survive. However, even getting past the first step, acceptance into a bill, shows how driven US-China trade relations are going to be on the US side by domestic politics, and especially in the run-up to November’s mid-term Congressional elections.

The Democrats — and it was one of their number, Dutch Ruppersberger, a Congressman representing a district in Baltimore, that proposed the amendment — are attacking Trump’s policies at every turn, scenting the opportunity to recapture control of at least one house of Congress from the Republicans in the mid-terms.

This partisan dimension further complicates the already complex trade relationship between the two countries. There may be no war-war for now, but there will be plenty of jaw-jaw.

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2 Comments

Filed under Agriculture, China-U.S., Energy, Trade

2 responses to “United States Puts Trade War On Hold

  1. Pingback: Trump’s 540 Degree Turn On ZTE | China Bystander

  2. Pingback: The US Resumes Its Trade War With China | China Bystander

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