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Politics & Law

Trump insists on $200 bn, after his easy US-China trade war victory

US trade delegation led by Treasury Sec Steven Mnuchin and Commerce Sec Wilbur Ross traveled to Beijing to discuss trade with Vice Premier Liu He (photo from The White House Office of the Press Secretary May 4, 2018)

On May 19, the White House, after a 2-day US-China meeting on trade, issued a statement saying that there “was a consensus on taking effective measures to substantially reduce the United States trade deficit in goods with China … China will significantly increase purchases of United States goods and service.

This will help support growth and employment in the United States … The United States will send a team to China to work out the details.”

However, in late May, Washington announced imposing tariffs on a list of goods importing from not just Europe and Americas, but also China which had just made a deal mentioned above. Why?

Firstly, it is about a number — “US$200 billion”.

CNN actually had reported on May 18 that “US officials on Thursday (May 17) told CNN that Beijing had proposed boosting Chinese purchases of American goods by around $200 billion in an attempt to reduce the massive trade imbalance between the two countries ($375 billion in 2017). But at a regular news briefing in Beijing on Friday, Chinese Foreign Ministry spokesman Lu Kang denies such an offer had been made.

‘These rumors are not true,’ he said …… The number reflected one of the US demands presented to the Chinese government during the first round of talks, which took place in Beijing earlier this month. The demand called for China to cut its trade surplus with the United States by $200 billion by the end of 2020 …”

Obviously, Beijing is willing to buy a huge amount of American goods to narrow down the deficit so as to meet Washington’s demand, but does not want to commit to a fixed number, namely, $200 billion, in public. Whatever, a ‘Trade War Victory’ has been easily won by Trump to “support employment” in Trump’s ‘red states’ and ‘swing states’.

Nevertheless, it appears that President Trump had a second thought afterward in late May. Simply speaking, he wants to nail down the ‘$200 billion’ number. Therefore, in early June, “Beijing warns promise to buy more goods will be void, as both sides finish two days of talks” between Commerce Secretary Wilbur Ross and Vice-Premier Liu He in Beijing. However, this warning does not change Trump’s mind.

Secondly, it is about Trump’s doctrine — “America First’.

Despite criticisms from the allies, President Trump’s 25% tariff on steel and 10% tariff on aluminum from the European Union, Canada, Mexico and India show that he does what he promises. Everybody knows that the EU attempts to become a ‘united states of Europe’ and the currency ‘Euro’ is a challenge, however weak or ineffective it may be, to the US dollar. Trump is saying ‘no’ to this challenge onto the US supremacy, even from close allies. You know this. I know this. Therefore, Beijing also knows.

In response to Trump’s global tariffs, Beijing claims they will take retaliatory action by “raising import duties on (some unimportant goods such as) lobsters, soybeans, electric cars and whiskey”. However, the promise (made on May 18) of buying lots of American goods (actually from Trump’s preferred or specified states) will keep on, though in lower profile. Given the costly lesson from ZTE (“$1 billion fine plus $400 million in escrow to cover any future violations”), China has no other choice but to comply with Trump’s demand. Beijing cannot afford the risk of being banned on buying high-tech intermediate goods such as chips, again.

The US-China trade war has been fundamentally concluded. What remains is how China struggles to negotiate something better if it is a must to meet the magic number of $200 billion. Therefore, Business Insider’s latest report that “China is trying to downplay a brewing trade war with the US by censoring comments from Trump and US authorizes” is no surprise to us: “……

 China has ordered state media not to report on comments from President Donald Trump or US officials because of the trade conflict.
 China told its media to not “attack Trump’s vulgarity,” and instead said to use state-sanctioned experts and promote “economic brightspots” by using “important page placement.”
 The notice indicates how China is trying to shield its citizens from news of trade escalations with the US.
 It also seems that Beijing is trying to not anger Western countries by completely censoring mentions of its “Made in China 2025” initiative, warning outlets to not use the phrase or “there will be consequences.”

All these indicate that Trump has won the trade war and Beijing is trying to conclude the deal’ terms a little bit better, quietly.

Trump’s unpleasant relations with his allies are … sorry, other concerns outside this article’s coverage.

The opinions expressed are those of the author, and not necessarily those of China Daily Mail.

About keith K C Hui

Keith K C Hui is a Chinese University of Hong Kong graduate major in Government and Public Administration and the author of "Helmsman Ruler: China's Pragmatic Version of Plato's Ideal Political Succession System In The Republic" (2013).

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