U.S. President Trump Moves to Closing Trade War With China

The United States is confident to roll back most of its tariffs as part of a trade deal with China but business persons and farmers think that Hurdles still remain.

The pain of President Trump’s trade war with China may soon be over but the American business persons and farmers are left wondering whether it was worth the trouble. The U.S. and China are reportedly getting closer to inking a trade deal. Negotiations with the Chinese are continuing, and Mr Trump could still secure more compromise to balance out a trading relationship he has long criticized as unfair. Beijing has offered to lower tariffs and other restrictions on the American farm, chemical, auto and other products and Washington considering removing most, if not all, sanctions levied against Chinese products since last year, according to the Wall Street Journal.

While previous administrations have tried to cajole China into changing its behaviour, Mr Trump has used a frank instrument deploying punishing tariffs to win adjustments. That has given the United States a marvellous amount of leverage, but it has also taken a heavy toll on automakers, farmers, manufacturers and other businesses with exposure to China. Apparently, hurdles still remain, and each side faces possible resistance at home that the terms are too favourable to the other side. Some farmers have permanently lost customers and contracts in China, while the profits and share prices of multinational businesses have taken a significant hit.

Among issues that may be resolved include, speeding up the timetable for removing foreign ownership limitations on car ventures and reducing tariffs on imported vehicles to below the current auto tariff of 15 per cent, according to the Journal. Beijing would also step up purchases of U.S. goods a strategy designed to appeal to President Trump, who campaigned on closing the bilateral trade deficit with China. Now, with the United States assured to roll back most of its tariffs as the two countries close in on a final agreement, the question is whether the costs of Mr Trump’s deal-making outweigh the benefits. “Can we go back to the tariff days? Yes, we can,” said Derek Scissors, a resident scholar at the American Enterprise Institute.

“Have we moved the bar since the beginning of the Trump administration? The answer is no.” The two sides continue to negotiate over issues involving Chinese industrial policy the U.S. argues gives Chinese domestic firms an advantage, especially state-owned enterprises. Last week, U.S. Trade Representative Robert Lighthizer said the provisions involving protecting intellectual property total nearly 30 pages out of a working document of more than 100 pages. Over the past several weeks, American and Chinese negotiators have been in almost constant contact over phone and video conferencing to hammer out the terms of a deal. Others involved in the talks said the U.S. is pressing Beijing to agree not to retaliate at least in some cases.

China has agreed to drop the retaliatory tariffs it imposed to counter Mr Trump’s levies on $250 billion worth of Chinese goods and to provide greater access to its markets for cars, beef, chemicals and other products. Beijing has a pawn to have Chinese companies purchase hundreds of billions of dollars worth of liquefied natural gas, soybeans and other goods over a number of years to appease Mr Trump’s focus on the bilateral trade deficit. China is also reworking some of its laws and regulations to better protect foreign intellectual property, ban the forced transfer of foreign technology to Chinese business partners and codify equal treatment of foreign companies.

In return, China wants Mr Trump to drop all the tariffs he imposed over the past year, which have begun to pannier the Chinese economy. While any final decision will fall to the president, people familiar with the negotiations say the United States is willing to offcut tariffs on at least $200 billion worth of goods, if not all. Mr Trump’s tariffs “were almost completely passed through into U.S. domestic prices,” the economists Mary Amiti of the Federal Reserve Bank of New York, Stephen J. Redding of Princeton University and David Weinstein of Columbia University wrote in a paper released late last week, “so that the entire incidence of the tariffs fell on domestic consumers and importers up to now, with no impact so far on the prices received by foreign exporters.”

The economists concluded that tariffs had already reduced incomes in the United States by nearly $7 billion and that the total cost to the economy had been even larger, because of price increases. By the end of last year, they estimate, the tariffs were costing consumers and importers a total of nearly $4.5 billion a month. Another study, from the researchers Ned Hill and Fran Stewart at Ohio State University, found that the economic drag from tariffs had at least partially offset stimulus from Mr Trump’s signature tax cuts. A survey from economists at the Federal Reserve Bank of Atlanta, the University of Chicago and Stanford University in January concluded that tariffs reduced business investment in the United States by 1.2 per cent or $32.5 billion in 2018.

“We won’t know until we see what the deal looks like, but it’s feeling eerily familiar,” said Scott Kennedy, a China scholar at the Center for Strategic and International Studies. Critics of the evolving deal have also said it suffers from a lack of specificity on certain provisions that China uses to systematically block foreign companies. For example, China is pledging not to distinguish against foreign companies when it sets new standards for technological equipment. We tried multilateralism and patient integration, and that didn’t go smoothly either, Mr Kennedy said.