Expect a Deal With China, Just Don't Expect Much From It

Trump says the trade talks with China are going well. And China will purchase soybeans again. Don't expect much more.

Talks Going Well

The New York Times reports China Offers Trump a Trade Peace Deal. It May Not Be Enough.

Beijing’s effort so far adds up “to a modest adjustment of Chinese foreign economic policy,” said Scott Kennedy, a scholar at the Center for Strategic and International Studies in Washington, “but nowhere close to the great leap in liberalization that the U.S. and others are seeking.”

Still, China has begun to budge. Last month, it dropped retaliatory measures on American-made cars and resumed purchases of American soybeans. It has also reduced tariffs on more than 700 categories of goods from around the world.

On cars and soybeans, American negotiators can claim some measure of victory. Soybean purchases have yet to reach earlier volumes, however, while Chinese imports of American-made cars are quite small since many are already made in China.

Chinese lawmakers last month released a draft of a proposed law that would stop local officials from forcing foreign companies to transfer their technology as a cost of doing business. The Trump Administration says that Chinese industries like cars and aviation have benefited from American technology.

The law may not change things meaningfully, said Donald Clarke, a specialist in Chinese law at George Washington University. The draft is vaguely worded, he said, and doesn’t acknowledge that the pressure American companies face to share their know-how often comes from behind-the-scenes maneuvering rather than strict government requirements.

The biggest sticking point in China’s package of concessions to the White House may be Made in China 2025, a government plan for developing high-tech industries. The Trump administration has repeatedly criticized the plan, saying that it is evidence that China unfairly supports its own companies over foreign competitors in the Chinese market.

Expect a "Great Announcement"

Both Trump and China need a deal. If there isn't a deal, China will again stop buying US agricultural products.

And Japan will be buying less US agricultural products thanks to a new Pacific trade agreement that Trump backed away from. See Remaking the TPP Without the US: US Ag Exports to Japan Will Plunge.

The tariff wars hurt both the US and China. Both nations want to save face.

Recall that Trump replaced NAFTA with great fanfare. The new agreement, USMCA, was nearly identical to the old agreement, but worse in one key aspect: legal protection of US companies against corrupt Mexican courts.

So expect another "great announcement" with minor tinkering around the edges.

Made in America

I have a basic question. If Trump can set a goal of made in America, and the French made in France, why can't China have a goal of made in China?

Mike "Mish" Shedlock

Comments (14)
No. 1-8
2banana
2banana

Is "Don't Expect Much" better than the terrible trade deal we currently have?

Then it is a win.

And another campaign promise filled.

Harmy
Harmy

"And China will purchase soybeans again." Of course China will buy US soybeans again. They will buy because it is the US taxpayer who pays the Chinese to buy cheap US soybeans - and corn and wheat and all the rest. The Chinese must be laughing their backsides off at the stupidity of the US government to actually pay people to buy US subsidized produce and still call it good business. It's not. It's a rort of the US taxpayer.

Mike Mish Shedlock
Mike Mish Shedlock

Editor

Might not be better. In fact, it won't be if Trump keep some tariffs and China doesn't. USMCA was slightly worse.

Casual_Observer
Casual_Observer

Reportedly we came to a deal to sell China rice. But it doesn't mean they have to buy it. I suspect a lot of this will happen. Trump will declare victory by saying "I opened markets that were not open before." And he will be right. But China already stopped buying Apple phones. The problem in dealing with a communist regime is the people will fall in line to buy what the government tells them or makes available. I frankly think if the only thing Trump accomplishes is to make America realize that we need to be self-sufficient in all industries, then the American people will come out winners. I am personally willing to wreck global trade if it means creating industries here again because I lost my job to globalization and offshoring. It is better to destroy it all and build from scratch than trying to patch together this sham of an economy.

Casual_Observer
Casual_Observer

BTW, China can make it in China. The world would be better off if they kept most of their crap products there. Certainly the Chinese don't buy them. China is an export driven economy. If the American consumer stops buying then China is dead too. Trump realized this. The problem the US and developed nations have is their middle class is disappearing and while we have cheaper products, we also have a long term effects of globalization. As long as that trend continues, Trump or the likes of Trump can easily get elected. Trump is a bad example so most people will throw out the baby with the bathwater. But after Trump is gone, the same problems will exist and embracing the same failed policies will result in another Trump being elected.