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Trump's No-Lose Trade War Fantasy

 
 

On Saturday, December 1, Chinese President Xi Jinping and U.S. President Donald Trump will meet on the sidelines of the G-20 summit in Argentina. The world will be watching to see if the two leaders come away with a breakthrough to end their escalating trade war, which has seen the United States slap tariffs on $250 billion worth of Chinese goods, with Beijing responding in kind.

No less a figure than Larry Kudlow, the director of the White House’s National Economic Council, emphasized the importance of the discussions on November 27. “This is an opportunity, with the two presidents, to break through what have been disappointing discussions,” Kudlow said, according to Politico. “[…]This is a big deal, this meeting. And the stakes are very high.”

But after a brief spell of optimism, stemming from a Trump-Xi phone call in early November and the original announcement of their summit, pessimism is creeping back in. The most recent round of hand-wringing stems from comments made by Trump himself, which seem to throw cold water on a possible breakthrough.

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Trump spoke to Wall Street Journal reporter Bob Davis earlier this week about U.S.-China trade relations, tariffs, and the possibility of a deal. In that interview, Trump set a high bar for a potential deal with China – a standard that is likely a nonstarter for Xi and the Chinese government.

“The only deal that would really be acceptable to me – other than obviously we have to do something on the theft of intellectual property, right – but the only deal would be China has to open up their country to competition from the United States,” Trump said.

When Davis pushed further, asking if Trump was willing to suspend a scheduled increase in the tariff rate set for January 1, the president’s answer was not encouraging: “I think it would be highly unlikely.”

Trump did add, later in the interview, “Here’s the bottom line: We’re going to make a great deal with China. And everybody hopefully will be very happy, including China.” But based on the tenor of the previous remarks, that comment seemed more geared to an eventual, hypothetical future, not a prediction pegged to the G-20 meeting.

Perhaps most concerning for China, Trump seems to be of the opinion that the current tariffs are cost-free for the United States. All of the worrying predictions of negative effects, he claimed, “have turned out to be false… we’re taking in billions of dollars. We’re creating tremendous numbers of jobs.”

“I am very happy with what’s going on right now,” the U.S. president declared, referring to the current tariff situation. “[…]We have money that is pouring into our treasury right now, and on January 1 it’ll become much more so.”

And, according to Trump, “the brunt of it is being paid by China.”

That fits in with comments Trump made in a separate interview with the Washington Post. In that interview, he suggested, as he has previously, that China is desperate to make a deal while the United States has little incentive to do so: “I think that China wants to make a deal very badly. I think we’ll either make a deal or we’ll be taking in billions and billions of dollars a month in tariffs, and I’m okay with either one of those two situations.”

Or, as Trump put it in his WSJ interview, “They have to open up China to the United States. Otherwise, I don’t see a deal being made. And if it’s not made, we will be taking in billions and billions of dollars.”

In Trump’s mind, then, the trade war is a no-lose proposition for the United States: either China gives in and Washington gets a “great deal,” or tariffs continue and the United States benefits from the extra revenue and adds new jobs. In Trump’s public comments, at least, there is no room for the possibility that the tariffs will also damage the U.S. economy, although that is the consensus of most experts.

Trump’s mental framing puts the onus entirely on China to offer concessions to end the trade war – something that is very unlikely to happen. For one thing, China is not keen to upend its entire government-centered development strategy simply to please Trump. And on a more symbolic level, Xi – who had repeatedly promise to oversee the “great rejuvenation of the Chinese nation” – cannot be seen as capitulating to U.S. demands.

When asked about Trump’s comments, Chinese Foreign Ministry spokesperson Geng Shuang reminded reporters that Trump and Xi had previously agreed “to seek a solution which is acceptable to both sides on the trade issues.”

“The China-U.S. summit is just around the corner,” Geng said. “We hope that the U.S. can meet China halfway and follow the consensus reached by the two leaders at the telephone conversation to strive for positive outcomes of this summit.”

With a president as mercurial as Trump, nothing is impossible. But Trump’s own comments leave little hope for “positive outcomes” on December 1.

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