Kimberly Ann
Those were among the clichés that came to mind during the Trump administration’s China trade policy gyrations over the past few weeks. Almost exactly a year after Commerce Secretary Wilbur Ross announced the results of a “herculean” effort to get a deal with China to boost U.S. exports of energy and agricultural goods, and six months after Ross announced another set of deals purportedly worth $250 billion in increased American exports of natural gas, soybeans, beef and pork, the White House released a joint statement in which China again promised “meaningful increases” in imports of U.S. agricultural and energy products. The chief White House economic adviser, Lawrence Kudlow, claimed the Chinese had agreed to increase American exports by $200 billion, but China denied that there was a commitment to any specific dollar figure.
In exchange for these vague—and recurring—promises, Treasury Secretary Steven Mnuchin announced that the administration would not impose tariffs on up to $150 billion in Chinese exports aimed at Beijing’s unfair trade practices. But after pushback from Congress and some in the American business community, harder-line administration officials and eventually President Donald Trump himself claimed that the threatened tariffs could still be imposed if Ross does not come back from China next month with a good enough deal—whatever that might be.
To add further confusion, the decision to put the trade war with China “on hold” followed an earlier tweet by Trumpordering Ross to do something about the penalties imposed on Chinese telecommunications company ZTE over its violations of U.S. sanctions against Iran and North Korea. After years of railing against the impact of Chinese trade on American jobs, the president declared on Twitter that barring sales of U.S. technology to ZTE threatened thousands of Chinese jobs. It reportedly followed a phone call from Chinese President Xi Jinping complaining that the ban on U.S. technology sales to ZTE threatened the viability of the company.
Just a few weeks ago, I wrote in this space that the Trump administration seemed to be turning tough words into action. It had imposed antidumping duties on large Chinese washing machines and solar energy equipment and levied tariffs on steel and aluminum, nominally for national security purposes. The Department of Commerce’s ban on U.S. exports of key technologies to ZTE was the most significant action. ZTE had admitted to selling equipment with American components to Iran and North Korea in violation of U.S. sanctions programs, but then did not fulfill the conditions on which the suspension of penalties was based. On a much bigger scale, the administration had threatened to impose what are known as Section 301 tariffs on up to $150 billion in Chinese exports over trade practices relating to intellectual property theft, forced technology transfer and other industrial policies.
Trump’s purported goals with these moves are to reduce the large bilateral trade deficit with China and to protect U.S. national security. Yet again and again, China manages to walk away from negotiations mostly unscathed. The duties on washing machines, solar energy, steel and aluminum affect a relatively small amount of bilateral trade. And China had made similar promises to increase imports of U.S. agricultural commodities and liquid natural gas on at least two prior occasions. In each case, the Chinese resisted Washington’s demands to reduce the bilateral trade deficit by a certain amount, knowing that the deficit is ultimately determined by macroeconomic factors beyond their control.
In the latest case, Chinese negotiators refused to specify a number for the value of increased U.S. exports they would buy, making it weaker even than the earlier announcements from Ross. So, déjà vu all over again, only worse. And where’s the beef?
Again and again, China manages to walk away from trade negotiations mostly unscathed.
Well, China did carry through on its May 2017 promise to Ross to open its market to U.S. beef exports, many years after the World Organization for Animal Health had designated them as having a negligible risk of BSE, or bovine spongiform encephalopathy disease—better known as mad cow disease—and several months after telling the Obama administration it would do so. After reaching a hardly whopping $6 million dollars, and 2.6 percent of U.S. beef exports globally, exports to China fell back to just over 1 percent of the total in the early months of 2018. At the current pace, it will take years to reach the $200 million target for beef exports that China promised to Ross in November.
More fundamentally, promises to increase purchases of U.S. soybeans, meat and natural gas do nothing to help American manufacturing, as Trump has promised. Nor do they anything to address the underlying economic policies that prevent U.S. and other foreign firms from being able to compete on an even playing field. The latest White House statement said almost nothing about intellectual property, for example. And the administration is now reportedly planning to restore export privileges if ZTE pays an additional fine and again commits to management changes of the sort on which it reneged earlier. In the face of deep dissatisfaction with its trade policies from farmers, and with a challenging midterm election looming, the administration’s negotiations now reportedly include China lifting the tariffs it imposed on U.S. agricultural exports in retaliation for Trump’s steel and aluminum tariffs.
Even if the reports that Trump ordered the removal of the harshest sanctions on ZTE in return for increased agricultural exports, or Xi’s goodwill, or something else, are untrue, the whole mess undermines U.S. credibility. Perceptions will inevitably linger that Trump is susceptible to flattery from Xi, and that the administration is willing to trade U.S. national security interests to mollify a key political constituency ahead of elections. A trade war is not the preferred outcome for many reasons, but the leverage of trade sanctions, as a last resort, needs to be on the table. Repeated announcements from Ross and Mnuchin that they have just concluded the biggest, best deal to increase exports to China do not help, especially when that “best deal” is really the same one they have been trying to negotiate all along.
The latest mind-boggling announcement from Trump, that he wants Ross to investigate whether automobile and truck imports are a threat to national security, will only make things worse. Increased tariffs on cars would, like the steel and aluminum tariffs, hit America’s closest allies and trading partners hardest. Again, like steel and aluminum, the threat of auto tariffs exposes the duplicity involved in calling this a national security issue. And, in terms of China policy, it will further alienate the very allies whose cooperation the U.S. needs to pressure China over its unfair trade practices.
The fundamental problem is that Trump, though a longtime skeptic of free trade, does not have a coherent trade policy. And deep divisions among his key economic advisers mean that the supposed chief negotiator, U.S. Trade Representative Robert Lighthizer, cannot develop one. So what emerges on trade is driven by short-run concerns and changes from one week to the next. The result is that American farmers and energy producers may sell a little more to China. But don’t expect this drama—or farce—to create many jobs, much less make America great again.
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