After months of stop-and-go negotiations with China the talks are said to be in the final rounds, with a new trade deal anticipated in the next few weeks.
While few details are known, what’s clear is that on the U.S. side, there will essentially be one big winner in the deal: President Donald Trump, who will claim it as a political victory.
The big selling point for the deal is that over the next six years, China will purchase up to $1.2 trillion in U.S. goods, translating to an additional $30 billion a year in American agricultural exports. That period covers a second potential term for Trump, who needs a policy win for his reelection campaign. He’s certainly out to sell this deal as a win, even if talks collapse and there ends up being no deal.
“We’re going to win either way. We either win by getting a deal or we win by not getting a deal,” the president said at a business roundtable in Burnsville, Minnesota, on Monday.
This a tough sell to anyone who has seen the numbers: The trade war with China has cost U.S. importers at least $19.2 billion after factoring in tariff revenues — that’s in addition to $40 billion in lost exports, prices raised, and jobs lost.
“If the U.S. recaptures the level of exports to China that existed prior to the trade war, it will never make up for the economic damage done to farmers and the rural economy from the tariffs and the drop in U.S. exports.”
Trump’s efforts to build a border wall have been stymied by Congress, his efforts to denuclearize North Korea have stalled, and even his free trade deal with Canada and Mexico is yet to be ratified by lawmakers in those countries or in the United States nearly five months after it was signed. Anxious for deliverables to his base, Trump has been promising that the deal is almost done since February.
“We’ll probably know over the next four weeks. It may take two weeks after that to get it papered… and it’s looking very good,” Trump told reporters at the White House earlier this month. He added that U.S. negotiators had hammered out “some of the toughest — really, the tougher points.”
But even as he’s saying how good the deal is, the president appears to know that it needs to be better, and is reportedly pushing for China to double or triple the $1.2 trillion in U.S. imports over six years. He has also asked China to lift $50 billion in agricultural tariffs, which have been hitting states that comprise of a wide swath of the president’s voter base.
Two of the hardest-hit industries in America — the soy and corn farmers — aren’t sure they can recover, even with the extra $30 billion a year in sales. Plus, China’s tariffs on U.S. goods might remain in place for another year.
“If the U.S. recaptures the level of exports to China that existed prior to the trade war it will never make up for the economic damage done to farmers and the rural economy from the tariffs and the drop in U.S. exports,” said Gale Lush, chairman of American Corn Growers Foundation, in an email to ThinkProgress.
“We expect the U.S. will be lucky to go back to the export levels that existed before the trade war given the fact that competitor export countries are gearing up their output and exports to capture opportunities for their producers,” he said.
What the deal won’t fix
Trump did not specify the “tougher points” he referenced in the press conference earlier this month, but the now-grounded Boeing 737-Max planes, which were to be part of the deal, and the forced transfer of intellectual property are considered sticking points.
China essentially denies forcing companies to hand over intellectual property as a condition of getting a license to do business there. In March, it adopted a new foreign investment law that loosened some of the regulations on foreign businesses. China also revised its Technology Import/Export Regulations (TIER) system, removing some administrative regulations.
In order to comply with World Trade Organization rules, China essentially tells companies that it’s optional for them to hand over intellectual property. In practice, generally, companies that choose not to share that data — which will then be mined and duplicated by Chinese companies, edging the foreign company out of the market in short order — will not be permitted to do business in China, though the reason for that won’t be articulated in writing.
Elizabeth Chien-Hale, an attorney specializing in international intellectual property protection, told ThinkProgress that China sees the new laws and TIER revisions as a “major concession….now there is a basis to claim an action, as opposed to before.”
These changes, said Chien-Hale, are in some measure responding to the pressure from the Trump administration, but they were also long in the making as China’s tech manufacturing capacities improve and the need for the earlier restrictions recedes.
But the new laws and revisions are not without backdoors — or, as Chien-Hale puts it, “other ways to support what has been removed” (via, say, judicial interpretation). It is also worth noting that Trump has refused to lift the tariffs on Chinese goods.
What’s unclear is whether China has negotiated lower prices for the goods it is buying from the United States. The deal also makes the United States more reliant on China at a time when it could be diversifying its trading partners, as recommended by some analysts, and using that as leverage in future negotiations.
Trump slapped the first round of tariffs on China in July 2018, accusing the country, as many others have, of unfair trade practices. China responded, starting off a chain of tit-for-tat tariffs that sent global markets on a rollercoaster ride, at times increasing U.S. trade deficits with China, and costing U.S. businesses billions of dollars.
Citing trade tensions and protectionism, the International Monetary Fund on Tuesday cut its global growth outlook to the lowest in a decade.
Trump’s trade war created stock market volatility, even as he looks to place the blame elsewhere — including the Federal Reserve — but the lasting legacy of these trade tensions, fears Lush, will be further damage to America’s farms.
“Farmers well remember the Nixon embargo of U.S. soybeans to Japan and how it caused the U.S. to be view[ed] as an unreliable supplier. Then Japan invested in Brazilian soybean production and infrastructure,” said Lush. “As a result it transformed Brazil from a minor export competitor to a country that now exports more soybeans than the U.S. This is what comes of bad U.S. trade policy.”