On Friday, I reported on President Trump’s announcement that the United States and China had reached a “ substantial phase one deal” trade. The president claimed that the deal included intellectual property concerns as well as a Chinese commitment to purchase American agricultural products. However, this morning it appears that Trump’s claims of a trade breakthrough may have been premature.
Statements about the deal in Chinese media are much more reserved than the president’s comments. China Daily, an official state newspaper, said, “While the negotiations do appear to have produced a fundamental understanding on the key issues and the broader benefits of friendly relations, the Champagne should probably be kept on ice, at least until the two presidents put pen to paper.”
The paper hinted that President Trump may change his mind on the deal before a formal agreement is reached, saying, “As based on its past practice, there is always the possibility that Washington may decide to cancel the deal if it thinks that doing so will better serve its interests.”
Mr. Trump scuttled another near-deal last spring when he slapped new tariffs on Chinese imports. Trade talks broke down in May as both sides hiked tariffs on the other.
“The US should avoid backpedaling, as it has in the past, and instead cherish what has been achieved as a manifestation of a healthy and steady China-US relationship that serves the interests of both countries and the world,” the Chinese editorial added.
Another Chinese state paper, The People’s Daily, also suggested that so far there may only be an agreement to agree. “The final outcome will depend on whether the U.S. can walk together with China, and create the necessary and sufficient conditions to push ahead,” an editorial in the paper said.
However, President Trump maintains that the deal has already been made and is effective immediately. On Twitter, the president said that the Chinese had “already started” purchasing American agricultural products and financial services. The president further confirmed that he was delaying a tariff increase that was scheduled to take effect on Oct. 15.
Can there really be a deal if one side says that there isn’t one? It’s a pretty sure bet that the tariff increase won’t take place as scheduled, but the odds are not as good that China is already placing new orders for American products.
While both countries will benefit from the pause in new tariffs, China seems to have won the round. As the Wall Street Journal notes, “The US [is] shelving new tariffs against Beijing while leaving many demands to be worked out later in return for an assurance of increased agriculture purchases.” The can has been kicked down the road.
The trade war has hurt both countries, but President Trump seems to be in a tighter spot than President Xi. The US presidential election is just over a year away and several sectors of the economy are slowing. The problem is particularly pronounced in manufacturing and agriculture, two core parts of the Trump base. In addition, the president faces an impeachment inquiry and a budding revolt from Republicans over his Syria policy.
The president needs a deal, but he also needs to project himself as a strong negotiator. The two goals are almost antithetical. On the other hand, if China can’t get a good deal in the short term, they just need to outlast Trump.