CHINA HAS BOUGHT itself some time in its trade dispute with the United States, paying in farm goods, energy products and other industrial imports.
After a two and a half hour meeting over a steak dinner at the G20 summit in Buenos Aires, President Xi Jinping and US President Donald Trump called a time-out in the two countries’ tariff war. The United States agreed to suspend for 90 days the hike in tariffs to 25% from 10% on $200 billion of Chinese imports due to take effect on January 1 and not to introduce any new ones in return for purchases of unspecified but ‘substantial’ value of the above-mentioned goods.
Beijing and Washington will also step up talks on addressing broader structural issues the Trump administration has with China’s economy and body politic, although on those, Foreign Minister Wang Yi was somewhat ambiguous when he said these would cover ‘legitimate’ US concerns, leaving open a vast definitional loophole of what would count under that term.
It also looks as if Beijing has agreed to reverse its regulatory blocking of a proposed $44 billion takeover bid by Qualcomm, the US semiconductor manufacturer that is the world’s largest, for the Netherlands’ NXP Semiconductors that torpedoed the deal. However, Qualcomm has since said the proposed merger is dead.
Perhaps the most impactful part of the deal will be China’s agreement to designate Fentanyl as a controlled substance. The Chinese-made pain-killer is behind much of the opioid crisis in the United States, and one that disproportionately affectsTrump supporters.
In hailing the agreement as ‘incredible’, regardless of the fact that China had given up little if anything, Trump highlighted the positive impact it would have on US farmers, pointing up the most acute political pain point he is feeling at home from his tariffs.
But in truth, he is providing only temporary relief.
Ninety days is not much time to make any progress even on talks about talks on the intellectual property and market access issues. And all the time the threat of a re-escalation of the tensions will hang over discussions.
There might be some opportunity to revive (and rebrand) the agreement Xi struck with President Barack Obama that China would refrain from commercial cyber-espionage, which has, to all intents and purposes, collapsed. However, China will not abandon its ‘Made in China 2025’ industrial policy and will need to acquire foreign technology in support, by whatever means.
In short, the Buenos Aires agreement resolves none of the underlying issues of the economic let alone geopolitical rivalry between the two countries.
We are still in a position in which Trump is addicted to tariffs and Xi has no clear idea on how to treat him.
Update: Trump has tweeted that China has agreed to cut its 40% tariff on US car imports, which were anyway due to be reduced before the tit-for-tat tariffs started. Neither side had mentioned this in public while in Buenos Aires and China has yet to comment on the tweet.