While updates on the trade war have intrigued investors for much of the past two years, the official signing of the deal has been greeted with a shrug. The S&P 500 rose about 0.2%. A benchmark for semiconductor companies that have been particularly sensitive to the trade war fell more than 1%. Soybeans are a good example of how the backlash against Trump`s trade policies has erupted. Before the trade war, they accounted for nearly 60 percent of U.S. agricultural exports to China. China did not randomly choose soybeans in retaliation. Eight of the top 10 soybean-producing states voted for Trump in 2016, including many crucial swing states.8 7. See U.S. Trade Representative and U.S. Department of Agriculture, Interim Report on the United States of America-People`s Republic of China Economic and Trade Agreement: Agricultural Trade, October 23, 2020.
This report includes data on projected U.S. exports – not actual U.S. exports as stated in the legal text of the trade agreement – based on weekly data on sales of certain agricultural products reported to the U.S. Department of Agriculture. President Donald Trump has blamed his recent predecessors for the current tensions with China, but many of the dynamics of the current trade war have been at play for centuries. While Richard Nixon`s visit in 1972 is often seen as the moment that opened relations with China, America`s relationship with the country dates back to its founding – and it has always been focused on trade. Tai also warned that the Biden administration “has serious concerns about China`s state-centered, non-market-based trade practices that were not addressed in the first phase.” In fact, during the first phase of the agreement, China did not accept any commitments affecting its subsidies or state-owned enterprises. Worse still, because the Phase One agreement did not negotiate the lifting of China`s retaliatory tariffs, the Chinese government introduced an exclusion process in which it decides which U.S. exports to buy from China, thereby strengthening the role of the Chinese state and state-owned enterprises in the Chinese economy. Yet Tai did not give details or suggest that the government intends to participate in negotiations with China in the “second phase.” Trump`s complaints about Chinese imports have historically focused on manufacturing, which accounts for 70 percent of goods covered by purchase obligations.4 The complaints included (among other things) China`s large trade surpluses on goods, higher tariffs on cars that forced U.S. companies to convert their technology and produce in China instead of exporting from America, and subsidized sectors such as steel and aluminum. which would displace U.S.
companies from export markets. Market turbulence and declining investment linked to the trade war would likely push global growth in 2019 to its lowest level since the 2008-2009 financial crisis, the International Monetary Fund said in October. One conclusion of the data is obvious. Americans suffered when China`s retaliation devastated U.S. exports. Trump`s higher tariffs have raised prices for U.S. consumers and costs for U.S. businesses. Its politically motivated procurement commitments may have created more problems than they solved. After the election, the US needs a new approach to solving its trade problems with China. The Phase One agreement also includes legal obligations for U.S.
services exports. However, data on bilateral trade in services is not widely available to track China`s services exports and is therefore not analyzed here. Our thought bubble about Dan Primack of Axios: The deal seems to be essentially a buy-in deal for agriculture — and doesn`t do much to address the fundamental issues that are supposed to be important to the president. Yet the trade imbalance has never stopped American entrepreneurs from doing business in China. Unlike the British, whose trade in China operated under the royal banner of the East India Company, American trade was a private matter. The economic and trade agreement of the first phase includes a chapter on intellectual property (IP), which strengthens the protection and enforcement of intellectual property in China. Simply relying on purchasing targets not only fails to solve China`s problematic policies that hurt Americans, but also helps solidify government planning as opposed to market-oriented outcomes. In particular, because China continues to impose discriminatory retaliatory tariffs on U.S. exporters, only its state-owned enterprises, not the Chinese private sector, will increase many purchases to meet commitments — the opposite of what U.S. policymakers say they want. The goals of the deal also send signals to America`s economic allies that the U.S. is primarily interested in China diverting imports from its suppliers, rather than attacking China`s problematic policies and undermining their confidence in U.S.
policy. .