Trump is determined to fix China’s trade relationship with the U.S., an issue that he has railed against for years, long before he even stood for the U.S. Presidency.
Although U.S. President Donald Trump’s “America First” policy has angered many including members of both parties of Congress, his efforts however has drawn broad support for his push to force Beijing to change its market-distorting trade and subsidy policies.
While the U.S.-China negotiations to end the trade war is reaching its endgame, company executives, politicians, and foreign diplomats are urging the U.S. to hold out for a little longer to ensure that China brings about verifiable and meaningful structural reforms in its trade policies.
Trump’s trade war “has let the genie out of the bottle” by lifting expectations that the trade war will force China to reform policies that businesses and foreign governments regard as unfair, said Steven Gardon, vice president of indirect taxes and customs at Lear Corp.
“Now that all these issues have been raised, there’s a lot more domestic political support to address these issues, and I don’t think you can pull back from that,” said Gardon. “There’s now pressure politically that they have to be addressed for the long term.”
Gardon’s views are reflective of the broad shift in international and U.S. business sentiment towards China’s trade distorting economic and trade policies.
U.S. negotiators have stated, they are in the final stages of negotiating what would be the biggest economic policy agreement with China in decades.
U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are slated to visit Beijing this week to try to accelerate talks with Chinese Vice Premier Liu He; Liu, is also slated to visit Washington in early April for another round of negotiations.
Significantly, Trump has made it clear that he is ready to keep U.S. tariffs on Chinese goods in place for “a substantial period” even if a deal is struck. For the purpose of optics, China’s President Xi Jinping is seen as reluctant to make economic reforms under pressure from the United States. In fact, Xi may find it easier to accept the load of the tariffs than to change China’s model for economic development.
In a typical Chinese maneuvre, Beijing has offered to buy big-ticket items from the United States in order to bring down the record trade gap. Such baiting tactics smacks of China’s unwillingness to reform since it does absolutely nothing to address the systemic issues that Washington has raised against Beijing’s trade and economic policies.
Washington has repeatedly pointed out that China engages in systematic intellectual property theft, forces foreign firms to give up trade secrets for access to its market and spends a fortune as subsidies for its own industries.
If Xi is serious about ending the trade war, which brought China to its knees, he should ensure that such policy reforms come from the highest level – China’s ruling Communist Party.
BROAD SUPPORT FOR TRUMP
According to the results of a survey released by the American Chamber of Commerce in China, in late February, a majority of U.S. companies support maintaining and even increasing tariffs on Chinese goods, nearly twice as many as last year, in order to push China into a level playing field.
In fact, the trade tariff has encouraged some reform-minded Chinese officials and private-sector business executives to call for a faster pace of reform in China as it celebrates the 40th anniversary of its first steps toward capitalism.
Lighthizer told lawmakers in late February that Chinese-American business people in particular have urged him to “hang tough” in the talks and not to “sell out for soybeans.”
It is critical that U.S. tariffs on China stays their course until China relents and significantly reforms its market distorting economic and trade policies. Talk of big ticket purchases indicate that China is not serious on changing its skewed economic policies.
A steady drumbeat of lobbyists, foreign diplomats, company executives, and U.S. lawmakers from both parties have urged Trump to stay the course on his demand for verifiable implementation of structural demands.
“While we want China to buy more U.S. goods … it’s even more important for us to hold China accountable to meeting high international standards on intellectual property rights, subsidization, overcapacity, and the other structural ways in which China distorts the global economy,” said Representative Kevin Brady from Texas, one of the most pro-trade Republicans and a critic of Trump’s tariffs, at a House Ways and Means Committee hearing.
Last week, Senate Democratic leader Chuck Schumer, a longtime China trade hawk, took to the Senate floor to urge Trump not to “back down” and take a deal based largely on Chinese purchases of American soybeans and other goods.
On Thursday, Schumer tweeted: “Now’s not the time to drop $200B in tariffs just because China’s close to a deal, @realDonald Trump.”
Countries allied to the U.S., including city states from the European Union, albeit smarting from the recent steel and aluminum tariffs that Trump imposed, are backing Trump to stay the course on China. This is despite their worry that Trump could impose duties on autos.
“We get complaints every day from our companies,” said an official from the EU while noting that despite repeated pledges from the Chinese government with regard to reforming its economic policies and trade environment in China for foreign companies, nothing has really changed.
Beijing’s promises cannot be trusted unless they are regularly monitored and verified.
EU trade commissioner Cecilia Malmstrom’s assessment of China’s behavior sounds almost like it was written by the U.S. Trade Representative’s office, charging that China has abused global trading rules.
China has “blurred the lines between state and private sector. The state has undue influence,” she said in a speech this month. “Intellectual properties of companies are stolen. State subsidies, direct or indirect, are common. And these impacts are felt at home and abroad.”
Many European diplomats and officials, who aren’t fans of Trump’s tactics, are nevertheless providing a broad support for his goals.
“We are against unilateral measures, but nobody is exactly sorry for China. On content we think he does have a point,” said a EU diplomat on the condition of anonymity. “Beijing has to understand that without reform, the system could just stop working.”
Trump administration officials insist that he has gotten the message and is holding out for “structural changes” to the U.S.-China relationship, along with an enforcement mechanism that holds China to its pledges.
“The notion that he’s just going to suddenly accept a bad deal is totally inaccurate. The president is going to walk away from bad deals,” said Clete Willems, a White House trade adviser to the Georgetown Law School forum.