The clock is ticking on a trade deal between the U.S. and China. January 30 and 31 negotiators met to discuss trade negotiations. Though negotiations are off to a good start, we are still a long way from a trade deal.
Time and Hope are Running Out
Chinese negotiators traveled to Washington D.C. to continue trade negotiations led by U.S. Trade Representative Lighthizer and Treasury Secretary Mnuchin. This 90-day trade truce began December 1. At this time, President Trump and President Xi agreed to delay U.S. scheduled increase in Chinese tariffs. This was in exchange for Chinese purchases of U.S. grain, decrease auto tariffs and meetings to come to a permanent agreement.
Despite negativity surrounding the negotiations, they began with a good start. During, China approved GMO varieties which were previously pending. Midlevel meetings which occurred in early January also went well.
However, not everyone was optimistic prior to the trade negotiations. Administration officials say the two sides remain far apart on key issues. U.S. officials have expressed their frustrations over an internal split. On one side, Mnuchin and others favor making a deal with China. Oppositely, others, such as Lighthizer, advocated for a tougher approach. The differences in internal opinions coupled with Trump’s unpredictability has seemed to create a chaotic policy-making process.
Prior to the meetings, David Dollar, a former U.S. Treasury representative, said,
“At the end of the week we’ll probably get some fairly bland statements suggesting that talks made progress. I don’t think they can hammer it out in the next few days.’’
Even after negotiations ensued, some still advise not to hold your breath for a deal.
“The only person who can cut a deal is Donald Trump. But it’s difficult for him to do so under the current circumstance because he is facing a lot of criticism domestically,’’ said Cheng Li, research director of the Brookings’ John L. Thornton China Center.
Snags in Discussion Slow Progress
Nevertheless, some of the negativity surrounding the situation may be correct. Despite a good start to negotiations, a few issues presented caused a slow in progress.
U.S. demanded change in Chinese business practices on intellectual property and state sponsored support for preferred, high-tech Chinese companies. This is a large part of the hold up. Furthermore, chances were also lowered by the U.S. decision to file criminal charges against Huawei and its chief finance officer. The Chinese team feels the company has been unfairly called out for punishment. Therefore, this is likely to cause some tension and negativity in negotiations.
Although China seemed ready to purchase more agriculture and energy, they do not appear ready to offer any concessions on intellectual property issues or any other reforms the U.S. has demanded.
President Trump has set a March 1 deadline to increase tariffs on Chinese products if there is no agreement. As we approach the deadline, many are fearful Trump may end up falling short of his goal to better our trade relationship with China.
With less than a month before a March 1 deadline for either a deal or an increase in U.S. tariffs, hardliners inside and outside the administration fret Trump is being outplayed by Chinese President Xi Jinping and seduced by what they see as empty promises.
Furthermore, Trump is likely to hail his own trade fight with China in his State of the Union address Tuesday.
However, the concerns are driven by what some aides and others see as the president’s appetite to strike a deal to calm financial markets. They are also — as seems to almost always be the case with the China trade conflict — embodied by soybeans.
Good, Bad and Ugly for Farmers
During negotiations, Trump hailed a Chinese offer to buy five million tons of soybeans. This was the most beneficial thing to come from the talks.
“That’s going to make our farmers very happy,” Trump said. “That’s a lot of soybeans.”
Though the gesture bodes well, it still did nothing to remove the retaliatory tariffs. This year China has only purchased 20% of what they had in the last marketing year. Even with the new purchase offer, a huge gap persists. This leaves a lot of uncertainty for farmers going into planting season.
While some feel the soybean purchase was the only meaningful agricultural commitment achieved, others expressed more animosity toward the subject. The move contained no commitment to drop the retaliatory tariffs. Additionally, it left many resentful at the amount of leverage China is holding over Trump.
One of Trump’s most persistent economic promises has been to rewrite the U.S. relationship with China. Negotiations took place and both positives and negatives arose. Trump has set a March 1st deadline and many are eager to see a deal reached soon. However, many are also doubtful a deal will be reached at all in this time frame. Regardless, the clock is running out and farmers are antsy to learn the outcome.