Cary Huang
SCMP Columnist
Cary Huang
Cary Huang

US-China trade war: who wanted a deal the most? Just look at the concessions made by both sides

  • Washington offered one concession – deferring the October 15 tariff hikes – while Beijing backed down on US farm purchases, IP and tech transfers, financial market liberalisation, exchange-rate reform and an enforcement mechanism

Negotiation is all about give and take. And the party more eager to get a deal done will give more. That is why Beijing made more concessions than Washington in the just-concluded first-phase deal after their marathon trade talks.

Hopes were dim for any such deal in the weeks leading up to the 13th round of talks amid a number of controversies including: China’s quarrel over a National Basketball Association general manager’s support of Hong Kong protests; the passing of the Hong Kong Human Rights and Democracy Act in the US House of Representatives; the Trump administration’s reported discussions around possible restrictions on capital flows into China; the US blacklisting more Chinese tech firms; and a travel ban on officials linked to human rights abuses in Xinjiang.
However, the political turbulence did not deter negotiators from striking a deal, as both nations want to end the tariff war that is badly hurting their economies. Politically, both US President Donald Trump and his Chinese counterpart Xi Jinping also wanted a deal in the face of their respective unprecedented challenges.
Trump needs a quick deal to end the trade war that’s hurting American companies, farmers and consumers, and which will imperil his re-election chances. He also faces an uncertain political future amid an impeachment inquiry in the House of Representatives.

But Xi might be more eager for a deal as nothing in today’s Chinese politics is more important than economic growth and China-US relations – two critical and interconnected issues. Once the world’s fastest-growing major economy, China has lost momentum over the past decade, with a steady downturn.

Gross domestic product growth dropped to a record low of 6 per cent for July-September and is certainly heading below the political benchmark. Despite his unique status, Xi’s political credibility and his grip on power are at stake if he fails to manage both issues, given that Sino-US relations had been largely stable and the economy robust before Xi’s reign.
The core takeaway of the phase-one partial deal is that the US made only one concession, agreeing to defer the October 15 tariff hikes – which would have raised the duty on US$250 billion worth of Chinese goods from 25 per cent to 30 per cent – in exchange for substantive Chinese concessions.

China is yin, the US is yang, and they need each other

Washington did not agree to halt fresh duties of 15 per cent on US$160 billion of Chinese exports scheduled for December. It also made no concessions for telecoms equipment giant Huawei, despite China’s repeated requests.

In sharp contrast, China’s concessions include: massive purchases of US farm products; intellectual property protections; actions to address technology transfer issues; opening up of financial markets; exchange-rate regime reform; and the establishment of an enforcement mechanism, according to the White House.

China’s pledged annual purchase of US$40-50 billion of US farm products is also a doubling of its appetite, given that it imported about US$21 billion annually on average in the peak years between 2012 and 2017. The imports dropped sharply to US$8.6 billion in 2018 and were US$7.7 billion in the first eight months of 2019.
Indeed, Beijing had begun taking action to address US concerns before the talks, placing large new orders for US farm products, opening up its markets and industries, enacting a foreign investment law that banned forced technology transfers, reviving rules to improve intellectual property protection, and taking action to reduce state subsidies to some industries.

However, the only thing certain about any negotiation is that it will lead to more negotiation. US and Chinese negotiators can look forward to more critical talks, given that they are still a long way from reaching a full and comprehensive trade agreement to end the spat between their countries.

Cary Huang is a veteran China affairs columnist, having written on the topic since the early 1990s