.. two potential paths for China seem to be emerging, according to participants in the trade negotiations and their advisers. Both would deliver trade wins for President Trump and his more moderate advisers, while also letting President Xi Jinping of China push ahead with his ambitious industrial plan to build national champions in cutting-edge technologies.
.. A stalemate appears the most likely endgame, with new American and Chinese tariffs staying in place for months or even years
.. A negotiated truce is also possible. Although the two sides remain far apart, Beijing has made subtle shifts to a more conciliatory position. China now appears willing to discuss changes to its strategic plan, Made in China 2025, which the Trump administration has identified as a long-term threat to big American industries like aircraft manufacturing, semiconductors and pharmaceuticals.
.. “The red line is China’s right to develop, not the concrete industrial policies and measures regarding Made in China 2025,”
.. They also worry that China is engaged in a rapid military buildup that would give Beijing ever more heft in Asia and around the world.
.. The tariffs address part of the president’s concerns, mainly by reducing American companies’ dependency on Chinese suppliers.
Doing the final assembly outside of China will allow companies to bypass the new American tariffs. It could also start to cut the deficit with China over the next couple years... But these moves may not do much to the overall trade deficit of the United States, rearranging it instead to other countries. Companies are just relocating the last steps in production plans to places like Indonesia and Taiwan rather than bringing them back to the United StatesBeijing will also retain a lot of leverage, given that the manufacturing of a long list of components, from wires and screws to electric motors and digital controls, will most likely remain in China... It has noticed that while many companies are looking at ways to change locations for final assembly, not one seems to be moving the production of entire supply chains... “They’re not looking at taking it out of China,” said David Hunter, the company’s chief executive. “They’re looking at where can they do the final transformation.”
.. Failure to reach a deal could weaken these moderates and further embolden hard-liners who advocate continuing China’s broad military buildup and its deployment of ever-harsher domestic security.
.. While the World Trade Organization has many rules to prevent governments from subsidizing companies directly, the rules are more vague on whether a state-run banking system can provide preferential loans. Such loans have been the core of Chinese industrial policy for many years, and continue to be under Made in China 2025.
.. “The trade war, as currently constituted, can go on for some time, and both economies can muddle through it without even strong effects.”
Europe’s Trade Victory in Washington
US President Donald Trump holds himself out as a brilliant negotiator, and his supporters regard his trade policy as a perfect example of his success. But in his recent trade talks with the Europeans, Trump was clearly out of his depth.
.. The two sides agreed “to work together toward zero tariffs, zero non-tariff barriers, and zero subsidies on non-auto industrial goods.” It seemed like a remarkable U-turn for Trump, who, until recently, was threatening the European Union with higher tariffs – and extolling the value of trade tariffs (which are essentially taxes on imported goods) more generally. He even called the EU a “foe” as recently as June.Substantive follow-through on the joint US-EU statement would represent a major policy shift for the Trump administration. But this is no triumph for Trump; rather, he seems to have been outmaneuvered by adroit European diplomats... what Trump and Juncker announced was essentially a pledge to work toward exactly the kind of trade agreement that the Obama administration was negotiating with the Europeans from 2013 through the end of 2016. Work on that earlier version, known as the Transatlantic Trade and Investment Partnership (TTIP), was suspended following Trump’s inauguration... Restarting the TTIP negotiation is a big win for Juncker.. It is also remarkable that Juncker managed to get Trump to emphasize working with the World Trade Organization to resolve issues regarding intellectual property rights.. What did Trump get from the Europeans, other than a return to a trade negotiation straight out of the Obama era? Trump claimed, at the press conference and subsequently, that he won a pledge from Juncker to buy more natural gas and “a lot of soybeans.” Some media coverage even suggested that the Europeans had made concessions. But that interpretation does not fit the facts... Regarding potential US exports of liquefied natural gas (LNG) to Europe, the Europeans have long been keen to increase this trade. The hold-up is US restrictions on energy exports... If there is any concession promised by the joint statement, it is from the Trump administration on this issue. This was made explicit in the fact sheetthat the White House subsequently issued: “the United States will make it easier for the EU to purchase liquefied natural gas.”At the same time, Juncker does not buy soybeans – the European Commission has no such budget, and any such imports would ultimately be a private-sector decision... . The price of US soybeans has fallen significantly more than has the price of Brazilian soybeans, as Brazil is not subject to the new Chinese tariff. Given this, it makes sense that the European private sector will buy more US soybeans, regardless of what Juncker says or does... there was no European concession at the White House on this issue – just a clever restatement of market realities... The soybean pledge has some superficial political appeal, as growers have found themselves caught in the crossfire of Trump’s trade war with China. The cost is real, and the Trump administration recently promised up to $12 billion to help affected agribusinesses.However, this entire potential cost is due to the Trump administration’s disruptive policies and represents a scandalous waste of taxpayer money – an amount equal to about one-third of the entire annual budget of the US National Institutes of Health.
.. Trump holds himself out as a brilliant negotiator, and his supporters regard his trade policy as a perfect example of his success. But in his recent talks with the Europeans, Trump was clearly out of his depth.
Farmers like me put Trump in office. Now his trade war is smothering us.
Farmers use a lot of steel, which Trump subjected to a 25 percent tariff in March. Combines, grain bins, fencing and cattle gating, which we are constantly upgrading and replacing, have become significantly more expensive as steel prices have jumped because of the tariffs. This has taken a painful bite out of our already-slim profit margins.
.. More than one-third of U.S. soybeans, the second-biggest crop in the nation, goes to China — about $12.4 billion worth. Since May, soybean prices have dipped about $2 per bushel to about $8.50 as export markets have dried up. For every dollar lower a bushel, farmers lose about 10 percent of their revenue.
.. pork exports to China are down nearly 20 percent this year. China is an especially valuable market for pork farmers because it purchases the lower-value portions of the hogs, such as the tongue and ears, that are difficult to sell elsewhere. As a result of the limited export markets, meat is piling up in U.S. cold-storage warehouses. Since May, prices of lean hog futures have fallen by 14 percent.
.. Congress should rally behind potential legislation by Sen. Orrin G. Hatch (R-Utah) that would give lawmakers more say in U.S. tariff policy, in line with the U.S. Constitution. This will allow elected representatives from American manufacturing and farming communities an opportunity to make their voices heard and deliver the message that farmers want trade, not aid.
.. Such legislation would also return tariff power to Congress, whose enumerated powers under the Constitution include the “Power To lay and collect Taxes, Duties, Imposts and Excises.”
.. Trump must listen to his manufacturing and farming constituents who put him in office and pursue trade agreements that help us increase our gross and net earnings without corporate welfare. That starts with shelving plans to open a new front in the trade war with China.
Why Trump Can’t Quit Tariffs
Because his other populist promises are broken, he has to keep this one.
.. His otherwise-unpopular presidency is floated on jobs and economic growth, and trade wars can be bad for both. So why not just drop the mercantilism and let the good times roll?.. The party’s senators generally have a better grasp of facts than the occupant of the White House, but the president often has a better grasp of politics. And the political truth is that Trump probably needs his tariffs, needs his trade war, to have any chance of re-election — precisely because it’s the only remaining economic issue where he’s stuck to his campaign promises and hasn’t just deferred to traditional Republican priorities... Those campaign promises, as everyone is well aware, were generally more populist than the official G.O.P. agenda: Trump promised
- middle-class tax cuts and a
- generous Obamacare alternative,
- he stiff-armed the entitlement reformers and
- talked up infrastructure spending, and he railed
- against free trade deals with every other breath.
And that populist branding was crucial to the electoral trade he made, which ceded a share of business-friendly suburbanites to the Democrats but reaped a crucial group of erstwhile Obama voters, mostly white and working class and concentrated in the Rust Belt and upper Midwest states, who ultimately handed Trump the presidency.
.. That was the story of 2016; the story since, though, is one of reversion to the older political order. Because Trump has mostly governed as a conventional Republican, a certain kind of conventional Republican has come home to him, keeping his support stable in the states that the Romney-Ryan ticket won easily in 2012. But for the same reason — because the infrastructure plan never materialized and the tax cut was a great whopping favor to corporate interests and the health care repeal-and-replace effort was a misbegotten flop — the swing voters he needs to hold the Midwest are now drifting away... Certainly the Republicans criticizing him on trade aren’t offering him such a path: Their overall vision is the same tired G.O.P. orthodoxy that went down to defeat in 2008 and 2012, and that Trump himself crushed in the last primary campaign... the fact that Trump’s tariffs are generally unpopular, even in Midwestern states, doesn’t matter politically nearly as much as their potential appeal to the narrow slice of blue-collar swing voters that he needs if he’s going to be re-elected. And their potential cost, for now, can be swallowed up by general economic growth or dealt with via cynical payoffs.. One of the strongest arguments for the countermajoritarian element in the Electoral College is that it provides a point of leverage for regional populations that have suffered particularly at the hands of an overreaching bipartisan consensus.