Wednesday’s signing at the White House of a US-China trade deal — what the administration is calling phase one of a longer process — featured an audience including potential beneficiaries of better relations like Boeing boss David Calhoun, casino mogul Sheldon Adelson and Blackstone chief Steve Schwarzman, as well as former Secretary of State Henry Kissinger. The agreement may, however, prove more effective as a short-term boost for Trump’s re-election campaign than as a long-term framework.
It’s an improvement for the economic outlook after months of rising tensions over trade and tariffs, although these were mostly created by Trump. The agreement also ostensibly addresses a major economic peeve of the president’s: trade deficits. Largely thanks to tariffs — which won’t go away as a result of the deal — the overall US trade deficit already fell by 8 per cent to $43 billion in November and is on track for its first full-year decline since 2013.
One big question, though, is whether the deal will stick. Beijing pledged to buy $200 billion more in American goods and services over two years, along with enforcing intellectual-property rights. It has fallen short on similar promises in the past.
A $100 billion per year increase in imports from the United States, including more manufactured goods like aircraft and autos, would be a 53 per cent bump from the 2017 base used in the deal, when the People’s Republic bought $187 billion in American goods and services. That may be an unrealistic jump and would force China to substantially divert purchases from other trade partners like Brazil. Chinese Vice Premier Liu He signalled caution, saying it would be based on market demand.
China’s assurances on technology and IP, meanwhile, echo promises made when it joined the World Trade Organisation in 2001 that have not brought concrete results. Other knotty issues, like industrial subsidies from the Chinese state, have been punted to the “phase two” talks.
Still, the timing works in Trump’s favour. The Senate is set to kick off an impeachment trial, and the campaign is hotting up the run-up to the November presidential ballot. Amplified with his penchant for hyperbole, the deal provides the perfect sound bite.