There have been conciliatory acts from the US and China this week with regard to trade. Trump says the US will delay a tariff hike for two weeks, China is lifting 16 trade restrictions. What could this mean for the future of trade negotiations?
Tariffs Delayed Two Weeks
Larry Lee of Brownfield Ag News says the President Trump has announced that he will wait to implement the planned tariffs on Chinese goods. Tariffs were slated to increase to 30% on October 1, but Trump has now delayed that for two weeks.
Trump has said that the measure is “a gesture of goodwill,” and honors the 70th anniversary of the People’s Republic of China. He also said that the decision came as a result of a request by Chinese Vice Premier Liu He.
The tariffs on Chinese goods will now increase to 30% on October 15 if a trade deal is not reached. More trade talks are scheduled for early October.
Chinese Lift Trade Restrictions Prior to US Announcement
Dw.com reports that the delay of the US tariff hike came after China announced that it was lifting some trade restrictions on 16 categories imported US goods for one year.
The lift of Chinese trade restrictions mostly impacts small items like fish food, cancer medicine, lubricant oil and chemicals- not more important goods like pork and soybeans. The Chinese tariffs on American pork is now at 72%, an that’s implored the Trump administration to offer $28 billion in compensation to American farmers.
Though the trade concessions on each side are small, some remain hopeful that they will smooth over next month’s trade talks between Chinese Vice Premier Liu He, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.
The trade war between the two countries has largely been blamed for a worldwide economic slowdown.
Chinese Pricing Agricultural Goods?
Alice Woodhouse, Demetri Sevastopulo and Christian Shepherd of Financial Times report that the Chinese ministry welcomed the act of goodwill from the US.
“We hope that China and the US can continue to meet each other half way and take practical steps to create a good environment for talks,” said Gao Feng, spokesman for the ministry.
The reciprocal acts from China and the US are the first signs since June that the two countries may be willing to pull back from their hard-line positions.
The Financial Times also reported that the Chinese are “making inquiries” about prices of US agricultural goods. On September 12- the day after Trump made the announcement that the increase of tariffs would be delayed- he took to Twitter.
It is expected that China will be buying large amounts of our agricultural products!
— Donald J. Trump (@realDonaldTrump) September 12, 2019
Trump has made several such promises before. He frequently announces that large agricultural purchases from China are just around the corner, and they’ve yet to come to fruition. Trump claims that he’s just holding out for a good deal, but farmers in the Midwest are growing increasingly impatient. They were a crucial part of Trump’s 2016 Presidential victory, and they are feeling a lot of pain from the trade war.
Negotiations Remain “Fraught”
“That was a provocative insult to the Chinese side,” said Susan Shirk, a former U.S. diplomat in the Clinton administration and now head of the 21st Century China Center at the University of California at San Diego. “This reflects the fact that the administration is basically incompetent when it comes to actually getting things done, negotiating and really inducing China to make the changes we seek.”
Eswar Prasad, former head of the International Monetary Fund’s China division said,
“This modest concession from Trump could give the Chinese government a bit of domestic maneuvering room in the next round of negotiations. But the path to any sort of deal is still strewn with many major obstacles and this concession by Trump doesn’t change the fundamentally unfavorable dynamics of the trade talks.”
Yao Xinchao, professor of international trade at the University of International Business and Economics in Beijing says that China is hoping to claim the moral high ground in order to mold public opinion. China is well aware of how the trade war is playing out in the Midwest ahead of an election year.
“Pork and soybeans are two important bargaining chips that China won’t play easily,” Yao said.
Chinese are Playing Us
David Gilbert of Vice News argues that Trump’s act of goodwill is actually just another win for the Chinese. He says that China’s concession includes just 16 items from a list of more than 5,000 and had been planned for months. It will actually help Chinese businesses. The list includes products that the Chinese don’t produce domestically.
Iris Pang, greater China economist at Dutch bank ING, says that this action by the Chinese doesn’t really represent a genuine “gesture of sincerity towards the U.S.” They’ve been considering exempting these products since May.
Nor should we consider it any kind of concession.
Hu Xijin, editor of the state-run Global Times, told Bloomberg the exemptions were not a sign of weakness from Beijing, but a decision that “shows psychological strength and self-confidence, it’s different from a concession.”
It’s important to be cautious about what we take from these reciprocal acts of goodwill. It appears that the tariff exemptions on the Chinese side may have been in the works for quite some time. Trump pushing back a tariff increase for a couple of weeks also seems like somewhat of an empty gesture. More of a way to control the narrative on trade.
Trade negotiations remain shaky. Trump says the Chinese may be “making inquiries” into US agricultural goods, but don’t hold your breath. We’ve been down this road before many times and not much has come of it.
The Chinese know that they have a strong hand, and all farmers can do right now is hope that Trump’s trade strategy works out in their favor.