President Donald Trump appears to have made a tactical retreat in his 21-month trade war with China. Both sides are declaring victory.
The Trump administration and China have announced they will sign a partial trade agreement Jan. 15. Trump has tweeted that the deal is “very large” and “comprehensive,” but the administration hasn’t released most specifics. The administration says work on a second phase will begin soon, and the president says he will go to China as part of that process.
A Washington Post analysis of what is known about the deal says it is a political win for Trump because he portrayed himself as tough on China, forced Chinese leaders to buy about $200 billion more of U.S. goods in the next two years and ended the conflict before it dragged the U.S. economy into a recession. Stock prices initially jumped with the agreement’s announcement, although Wall Street’s enthusiasm waned subsequently.
As part of the deal, Trump backed off planned tariffs on Chinese-made retail and tech goods, although tariffs of up to 25% remain on about $370 billion in Chinese imports.
It’s unclear if the conflict achieved Trump’s stated goal of protecting the intellectual property rights of U.S. companies. China had not agreed to scale back government subsidies for industries like steel. The U.S. still has a big trade deficit with China, although it has gone down some. The trade deficit with other nations — especially in southeast Asia — is growing, the Post analysis point out.
In other words, it’s too early to say who was ahead when the world’s two largest economies announced an economic armistice.
But if this signals an end to the trade war, we’re glad. We never thought it was a good idea, especially without a unified front from our Western allies. Free trade builds economic bonds around the world and brings prosperity to both sides. Trade wars make actual wars more likely, short of that, hurts farmers, export-product workers and consumers — just about everyone.