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Chen Dingding: Trade War Truce Will Relieve the U.S., for now

2019-03-07

By Chen Dingding and Xia Yu    Source: China-US Focus    Published: 2019-3-5


On February 24, U.S. President Trump twitted that he would delay the tariffs increase due to progress in negotiations with China, indicating that the possibility of reaching an agreement increases. The Sino-US trade friction in the past few months has confirmed that continued confrontation can only hurt China and the United States and even endanger the global economy. According to Reuters, the trade war has caused billions of dollars in losses to both sides. After announcing the above decision, Trump made a speech at the White House and expressed his hope to reach a trade agreement with China that is beneficial to both countries. In fact, if the issue gets properly resolved, it will be positive news not only for China and the United States but also for the whole world.


There is a voice that if China and the United States reach an agreement, it must be “China who has made a huge concession”. It is undeniable that there is still a huge gap between two countries’ economic strength, but it should be noted that the United States is actually facing greater political pressure at home. Especially after the mid-term elections, the Trump administration has felt the pressure rising. Trump, stumbled by the domestic politics, has no time to consider upgrading the trade war under the current situation.


First of all, the complexity of domestic affairs has made the U.S. president too busy to be in two places at once. The mid-term elections at the end of last year reshaped the landscape of American politics. The Republican Party maintained the control of the Senate, yet the Democrats won the majority of the House. Although Trump acclaimed victory afterwards, the outcome released a dangerous signal, since in the next term, Trump will have to face a House of Representatives controlled by the Democrats. Whether building a wall on the US-Mexico border or launching large-scale infrastructure construction, Trump will face strong opposition from the Democratic Party, making it difficult to fulfill the promises made to his supporters during the campaign. At the end of last year, the federal government was shut down for 35 days due to the controversy surrounding the border wall. What’s worse? The Democratic Party’s launched new investigation into a series of scandals related to Trump. In 2019, the curtain on the US presidential election will be gradually lifted, and Trump will face immense challenge from the Democratic Party. Beset with difficulties from all sides, Trump is forced to prioritize handling domestic affairs, which obviously diminishes the option of continuingly being aggressive on trade issues towards China.


Second, the trade war directly hurts the interests of Trump’s potential supporters, namely the middle and lower classes of the United States represented by farmers. On the one hand, China has long been one of the major markets for U.S. agricultural exports. In 2017 alone, China imported $24.12 billion dollars of agricultural products from the United States, accounting for 19.2% of China’s total agricultural products imports; $7.73 billion dollars of agricultural products exported to the United States, accounting for 10.2% of China's total agricultural exports; China's agricultural trade deficit with the United States reached $16.38 billion dollars. In 2018, in response to trade frictions, China has implemented counter-measures in the agricultural sector. The first batch of taxable products covers nearly 90% of the agricultural products imported from the United States. US failed to find alternative markets in the short term, resulting in a sharp decline in agricultural exports. Thus, American farmers are generally reluctant to see trade conflicts between the two countries and are concerned about the uncertainties in the future of Sino-US relations. On the other hand, the trade war has caused the price of consumer goods in the United States to rise, while the cost of living for the middle and lower classes has further increased. A survey indicates that, in 2018, U.S. manufacturing and non-manufacturing companies made a rare move to increase their product prices in the middle of the year, at the rapidest rate in nine years. These middle and lower class Americans who have directly suffered from the trade war are long-term supporters of the Republican Party. Consequently, in the face of the upcoming general election, how to effectively appease the middle and lower classes will be the top concern of Trump.


Finally, on certain issues involving international security and global governance, the United States needs to work with China. During the G20 Summit last year, apart from talking about trade issues, the two sides also discussed the Korean Peninsula, Taiwan issue and the anti-drug cooperation. For example, on the issue of drug control, China and the United States have reached a consensus that China will strengthen control over fentanyl. This fully shows that although there are differences between China and the United States, collaboration is still possible. For the United States, a rising China is an undeniable fact. Considering the deep interdependence, it is not a wise choice to ignore the role played by China in many fields and refuse to cooperate. Trump warned that he could walk away from a trade deal if it is not good enough only four days after the announcement, he in fact has not many bargaining chips in this game. Indeed, as Trump said in Hanoi after the summit with North Korea that failed to reach an official agreement, he is never afraid to walk away from a deal. But now he seems to be short of power, time, and opportunity to achieve his words beyond his tweets.


It is true that a truce in the trade war will not solve all the problems between China and the United States. Some American media and scholars have pointed out that it is difficult for the United States to force structural changes in China, and therefore it is not very optimistic that the trade war will end permanently. As a result, even if this protracted confrontation seems to see the glimmers of hope to end, China must stay alert about the possibility that the United States may seek to challenge China in other fields through other means. To deal with the intricate relationship, it is necessary for China and the United States to move closer towards each other in the future.



Chen Dingding is a visiting fellow of Chongyang Institute for Financial Studies at Renmin University of China.


Key Words: Trade War   Truce   China   Chen Dingding  

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