US economy

The U.S. and Chinese Presidents Should Go on a Weekend Retreat

But that’s now water over the dam.

Trump’s team thought its approach was working — that tariff pressures plus negotiations would get China to enact into its laws restrictions on cybertheft of intellectual property, forced technology transfers, certain subsidies to Chinese companies, nonreciprocal trade rules, currency manipulation and barriers to China’s financial services markets, among other issues. Negotiators also discussed a detailed process for adjudicating disputes.

All along, though, the Chinese complained that the language sought by the U.S. was one-sided and tantamount to a confession of guilt by China that would make it look as if President Xi Jinping was kowtowing to the U.S.

The Chinese also complained that Trump was making excessive demands in terms of the amount of U.S. goods and services he wanted China to buy to reduce the trade imbalance, and that the U.S. would still not guarantee to end tariffs. Also, some Beijing hard-liners wanted to teach the Americans a lesson about the real balance of power today — or, as one of them put it to me last year: “You Americans are too late. We’re too big to be pushed around anymore.”

Whatever the reasons, in the first week in May, following intense trade talks in Beijing — which left the Americans thinking they were getting close to a deal — the Chinese sent back their latest edits on the working draft: On page after page, sources said, lines were drawn through almost all the clauses the two sides had been negotiating for months. No deal.

Trump was livid, and on May 10, he hiked the tariffs on another $200 billion in Chinese exports to the U.S. to 25 percent from 10 percent. Beijing then slapped new tariffs on $60 billion of U.S. products.

On a separate track, Trump put the Chinese telecom giant Huawei on a list of companies that need special permission to buy U.S.-made microchips, software and other components. The reasons were Huawei’s long history of reported stealing of intellectual property and the fear that if our allies bought Huawei’s 5G telecommunication system it would open them and us to much greater Chinese espionage. China retaliated with an edict to strike back at any foreign company that boycotts Huawei.

And that is how a trade war can escalate into a full-scale U.S.-China economic war. It may be that China’s government simply cannot or has no desire to change its growth model — hard work, smart infrastructure and education investments, a high savings rate, plus lots of unfair trade practices — because it would mean the end of Communist Party rule.


Leave a Reply