China-US Trade: Trump’s Two-Step

US President Donald Trump (left) and Chinese President Xi Jinping pose for a handshake at the G20 Summit in Osaka, June 2019. Photo credit: Xinhua

US PRESIDENT DONALD TRUMP cannot strike a trade and technology deal with China unless Beijing is at the negotiating table. He needs a deal, however cosmetic, to fire up his base ahead of the 2020 US presidential elections. He also needs it before the tariffs he has imposed and the slowdown to global growth the prospect of a full-blown US-China trade war has caused start to inflict consequential pain on the US economy.

President Xi Jinping, too, needs a deal to ease the domestic political and economic pressures on himself and the economy, respectively.

Hence President Trump’s announcement following his meeting with Xi on the sidelines of the G20 summit in Osaka that the two countries would resume their high-level trade talks and that US companies would no longer be prevented from selling components to telecoms giant, Huawei, hitherto vilified by the Trump administration as a national security risk to the United States.

In return for returning to the negotiating table, China would have the threat of a blanket 25% tariff on all its exports to the United States suspended.

This is a retreat from the United State’s previous position. The question is whether it is the one step back to take two forward that Trump hopes or just the one step back that it appears to be.

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Filed under China-U.S., Technology, Trade

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