Politics

Trump’s Tariffs Victorious? USA Agrees to Delay Tariffs as China Comes to the Table

A sharp escalation in the on-going trade war between the United States and China, the world’s two largest economies, has been put on hold. With China staring down 25 percent tariffs come January 1st, the two countries have agreed to a cease-fire of sorts. Following a two-and-a-half-hour dinner in Argentina, President Donald Trump has agreed to maintain 10 percent tariffs, for now.

“For now” are the keywords here. The increase in tariffs might still come but won’t automatically kick in on January 1st. Instead, China and the United States will continue to sort their problems out. Apparently, China has agreed to make a “very substantial” purchase of agriculture, energy, and other goods from the United States.

Trump is hoping that the increased purchases will shrink the deficit between the United States and China. Through September of 2018, the United States imported nearly $400 billion worth of Chinese goods while exporting just $93 billion. Despite the tariffs, exports from China have actually increased as the year has worn on.

Trump has also claimed that tariffs on American cars will be lowered. China recently lowered tariffs on foreign cars from 25 percent to 15 percent but then raised tariffs on American cars to 40 percent. This was in response to Trump’s tariffs.

Speaking on the talks, President Trump noted: “If it happens it goes down as one of the largest deals ever made. It will have an incredibly positive impact on farming, meaning agriculture, industrial products, computers, every type of product.”

The biggest victory may be yet to come. According to the White House, Chinese President Xi Jinping and President Trump both agreed to negotiate on forced technology transfers and cyber theft. Forced transfers have long been a priority for President Trump. As it stands now, the Chinese government often forces western companies to hand over intellectual property if they want access to China.

Critics of this system argue that China is basically stealing American technology, thus eroding the United States’ technological advantages. China and other developing countries have argued that these practices are necessary to reduce inequality between nations.

For now, the delay in the tariff increases has been set to 90 days. Should both parties fail to reach a deal within that time frame, either another extension would be needed or tariffs would rise to 25 percent. While 10 percent tariffs likely aren’t enough to hurt China’s exports, 25 percent could prove to be very painful.

For China, the extension was all but needed. China has been an engine of economic progress for years, regularly recording high growth. This year, however, the Chinese economy has slowed down considerably, while the financial sector remains a mess. Years of loose monetary policy and easy lending have resulted in potential asset bubbles. Meanwhile, the construction boom has led many to argue that China could suffer a housing market crash similar to what America experienced back in 2007.

Right now, Chinese organizations are shedding workers at a rate not seen since 2016. The November purchasing manager’s index has also stalled. Meanwhile, capital flight and defaults on loans remain a serious problem. While the Chinese government has been responding with stimulus measures, Trump’s tariffs are threatening to undo what little momentum China has.

Meanwhile, Chinese manufacturers appear to have produced a glut of goods, having manufactured far more than actual demand. This could lead to layoffs and plant closures in the future unless China finds a way to unload all its goods. That’ll be all the more difficult if Chinese exporters are facing 25 percent tariffs in the United States.

The opinions expressed here by contributors are their own and are not the view of OpsLens which seeks to provide a platform for experience-driven commentary on today's trending headlines in the U.S. and around the world. Have a different opinion or something more to add on this topic? Contact us for guidelines on submitting your own experience-driven commentary.
Brian Brinker

Brian Brinker is a political consultant and has an M.A in Global Affairs from American University.

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