Beijing insists that any concessions, such as they are, won’t begin without the prior removal of tariffs implemented by the Trump administration. But that simply was not what was agreed in October. Beijing is trying to turn back the clock to before the trade war with make-believe concessions.
Furthermore the concept of a “Phase 1” trade deal was already a concession to China—effectively a skinny deal advocated by Treasury Secretary Steve Mnuchin in lieu of the comprehensive reform in China that Trump has long sought. It won’t address most of the “seven deadly sins” of Chinese trade misconduct, which, beyond intellectual property theft, include forced technology transfers in joint ventures, exporting deadly fentanyl to America, cyber attacks, currency manipulation, dumping goods to put U.S. companies out of business, and subsidizing Chinese state-owned enterprises.
One other important factor has changed since October: the U.S. economy, whose stunning growth since Trump’s election was needlessly slowed by Federal Reserve incompetence, has begun to roar again. GDP growth in the third quarter was recently revised upward, and unemployment is lower than it has been in 50 years. Wages are growing faster than at any time during the Obama years, and growth is higher still for the middle class.
Meanwhile, China’s communist economy is sputtering. Trump has forever shattered the illusion that America couldn’t get tough with China on trade because we were somehow beholden to them and vulnerable. The opposite is true.
The trade war has compounded other economic problems in China and contributed to a noticeable downturn. Notwithstanding fake official numbers, GDP growth is probably near zero, debt is out of control, and food prices have spiked.
On top of economic problems, Beijing has also run into political trouble because of its heavy-handedness in Hong Kong, where protesters remind the world what Chinese who have some freedom think of Beijing’s tyranny. The crisis there furthermore raises doubts about Chairman Xi Jinping’s judgment, political stability in the rest of China, and whether a spasm isn’t coming within the ruling Communist Party as bad news compounds.
Put simply, the USA does not need a trade deal with China, and now would be an unfortunate time to throw a lifeline to the Chinese government.