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Inside Out | Hold the champagne, Mr Trump. China isn’t about to give the US a preferential trade deal
- Trump’s tariff war is harder to win than he claimed. Studies have found that the US economy is paying the costs of his tariffs. Meanwhile, China’s overtures to other trade partners suggest it won’t cut a preferential deal with the US
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Why you can trust SCMP
Seven months ago, as the United States’ tariff war on China began to bite and trade negotiations began to get serious, I crafted a memo advising Xi Jinping on his best negotiating strategy. As we are now on the brink of what Donald Trump will inevitably boast is the best US trade deal ever, I face a moment of truth: did Chinese negotiators heed my advice? Will the world trading economy emerge in a better place? Will the pain and cost of the tariff war have been justified?
In short, my note told Xi in no circumstances to bend to pressure from US negotiators demanding a unilateral deal for the benefit of US exporters. Instead, Beijing should acknowledge the need for wide-ranging reforms, keep lines open with other major trading partners, and make sure any deal offered to the US can quickly be multilateralised.
My biases still make me wish for a wholesale rejection of Trump’s “America first” unilateralism, with international trade built around bilateral agreements and disputes settled in everyone’s domestic courts. That would be a world that might benefit the US as the playground bully, but could benefit no one else. It would destabilise seven decades of compromise in robust multilateral institutions, and undermine the prosperity and stability we have known most of our lifetimes.
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Xi and his trade team have for the past two years pinned their rhetoric firmly to the mast of multilateralism. When it comes to the crunch, will they stand fast, or bow to relentless pressure to cut a preferential deal for US exporters?
Interpreting the results of the deal will be complicated by the fact that by October last year, the trade negotiations had clearly split into two. The earlier negotiations followed Trump’s original tariff war agenda, focusing on the merchandise trade balance and seeking to open China’s market to more US exports – farm goods, natural gas, Boeing aircraft and so on. When Trump claimed that trade wars “are good, and easy to win”, this is what he was talking about. So, too, when he talked with breathtaking naivety of tariffs as “the greatest negotiating tool in the history of our country”.
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