Is Trump’s trade deal a nothingburger?

Foreign Affairs

On December 13, the White House announced a “phase one trade agreement” between the U.S. and China, and was not modest about boasting of the Trump administration’s achievements. However, Chinese state media has not confirmed that this is a done deal, and even if a deal is real, it's not clear much has been achieved.


Photo credit: SupChina illustration by Derek Zheng

From the White House: On December 13, the Office of the U.S. Trade Representative released a statement announcing a “phase one trade agreement” between the U.S. and China. The statement was not modest about boasting of the Trump administration’s achievements:

The United States and China have reached an historic and enforceable agreement on a Phase One trade deal that requires structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange.  The Phase One agreement also includes a commitment by China that it will make substantial additional purchases of U.S. goods and services in the coming years.

U.S. Trade Representative Robert Lighthizer further claimed that the deal will “nearly double US exports to China over the next two years.”

The Beijing side of the story: However, in Chinese state media, a U.S. commitment to cut its tariffs on China is the only concrete commitment in the text. There is also an ominous paragraph that makes clear this is not a done deal yet, as it still requires “legal review, translation and proofreading.”

The bottom line: The trade deal doesn’t amount to much, per Scott Kennedy, who researches Chinese business and economics at the Center for Strategic and International Studies:

…by [the Trump] administration’s own metrics, the trade war has not paid off. Total U.S.-China trade and direct investment have slowed, but these changes reflect the diversion of trade to others, not the movement of manufacturing back to the United States. Moreover, far from abandoning its efforts to achieve technological independence, China is doubling down on what it calls “self-reliance.” The deal’s apparent big winners, U.S. farmers, were not in harm’s way before the trade war, and they likely would have sold just as much in aggregate to China had the trade war never commenced.

Beyond the “gain” of returning to the pre-trade-war status quo, mutual trust between the two governments is lower than ever. After 529 days of spiraling tensions, it “will become harder than necessary to find ways to cooperate with the Chinese on pressing regional and global issues such as climate change,” Kennedy points out.

Just in the last week, two stories have made it clear that the stakes of U.S.-China rivalry are only getting higher:

  • “The American government secretly expelled two Chinese Embassy officials this fall after they drove on to a sensitive military base in Virginia,” the New York Times reported, adding, “The expulsions appear to be the first of Chinese diplomats suspected of espionage in more than 30 years.”
  • Beijing ordered all government offices and public institutions to remove foreign computer equipment and software within three years. The Financial Times notes that the order “is the first publicly known instruction with specific targets given to Chinese buyers to switch to domestic technology vendors, and echoes efforts by the Trump administration to curb the use of Chinese technology in the US and its allies.”