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US President Donald Trump takes part in a meeting with China's Vice Premier Liu He in the White House on February 22. Beijing knows, following the conclusion of the Mueller report, that Trump’s chances of re-election have risen, creating increased incentive for an agreement. Photo: AFP
Opinion
Andrew Hammond
Andrew Hammond

China and Donald Trump both want a trade agreement soon, but it’s far from a done deal

  • With Trump riding high after the Mueller report, he and China see a need to strike a deal soon. But the US president faces pressure at home to stay tough, and has proven willing to walk away before
Andrew Hammond
Andrew Hammond
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US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are scheduled to begin a new round of trade negotiations with China in Beijing on Thursday. While a deal is still by no means “in the bag”, there are growing incentives for both sides to cut an agreement at or before June's G20 meeting.

Donald Trump said on Tuesday that “probably one way or the other we’re going to know over the next three to four weeks”, with both sides poring over a reportedly 150-page document, which he said would be an “excellent” agreement.

So this could potentially mean a conclusion before June’s G20, and a Trump-Xi Jinping meeting in April or May, given that the US president has a penchant for ego-boosting summits and is known to ideally want to seal any deal face-to-face with his Chinese counterpart.

The most recent stimulus for a positive conclusion is the Mueller report ’s conclusion last week, which is perceived in many world capitals to have placed Trump in a stronger domestic political position.
With the charge of “collusion” with Russia (but not “obstruction of justice”) apparently found wanting, the report is neither the complete vindication for Trump that the White House suggests, nor the worst-case scenario either. In this context, his prospects of winning a second term are widely seen by Beijing as having risen, thereby providing more incentive for Chinese policymakers to double down now in the trade negotiations.

The formal conclusion of the Mueller report also gives the president more potential political space to focus squarely on 2020, and seek in coming months to try to fulfil his “Make America Great Again” agenda. This programme includes reducing the US global trade deficit and cracking down on trade practices perceived to be unfair.

The Trump White House still has Beijing squarely in its sights here as signified, for instance, by the signing of legislation last year requiring the US commerce secretary to deliver a report on Chinese investment in the US to Congress and the Committee on Foreign Investment in the United States every two years, up to 2026. The bill singles out Chinese investment as a security threat and zeros in on Beijing’s “Made in China 2025” plan.

‘Let’s see who blinks first’: China’s trade war strategy revealed

So much so, in fact, that some in Beijing perceive the new US legislation as just the latest part of a wider, grand strategy under Trump to thwart the nation’s rise  as a global superpower.

This sentiment underlines that, while hopes of a trade deal are rising again, bilateral tensions have by no means disappeared and still have the potential to severely disrupt what is probably the world’s most important economic and political bilateral relationship. It is important to note, too, that Trump is also under political pressure from some Democrats over the terms of any trade deal.

Take the example of Senate Minority Leader Chuck Schumer, who said last week that Trump should not “back down” and take a deal based largely on Beijing’s purchases of US soybeans and other goods.

The long-time China hawk, now one of the most powerful Democrats in the nation, also tweeted that “Now’s not the time to drop [US$200 billion] in tariffs just because China’s close to a deal”.

All of these factors, alongside the complexity of the agreement being negotiated, is one reason why progress has dragged after Trump had set a tentative deadline of this month to try to reach a deal. And, in this still uncertain context, President Xi is unlikely to want to travel to the US for (or host in China) a high-stakes foreign summit with Trump unless a deal is more or less completely brokered beforehand.

This is especially so following the US-North Korea summit last month in Vietnam, which ended in a diplomatic disaster – after months of painstaking negotiations were expected to yield a deal – when Trump “walked” away from talks with Kim Jong-un.

The mercurial nature of the US president is widely recognised in Beijing as a relevant factor in any negotiation end-game as, while economic and security fundamentals will largely determine the course of ties in the coming years, personal warmth between the two leaders could also be key, as was the case during the Obama years.

Should talks break down in the coming weeks, despite the presently positive mood music, Beijing will know there remains the possibility that Trump’s rhetoric will get very hostile again, as happened during much of 2016 and 2017.

Beware the knock-on effects of Trump’s embattled presidency

He has previously asserted that “China … has been very tough on our country … We probably lost last year [US$500 billion] in trade to China”.

And it is this narrative that Trump may return to if he judges that it is once more in his political interests.

Taken overall, both sides now have growing incentives to conclude a trade deal this spring. However, talks could yet break down again as soon as April, and any final breakthrough may require the personal intervention of Trump and Xi at the G20 meeting, or a special summit beforehand in China or the US.

Andrew Hammond is an associate at LSE IDEAS at the London School of Economics

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