Getting a Trade Deal with China

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Prospects of a trade deal with China are unclear. I’ve always believed there will be an agreement—and I still do—but it will require a lot of compromise. If you think about the ongoing negotiations as a poker game, both sides still hold valuable cards. Here’s how I see it.

The U.S. is in an overall position of strength. A reduction in free trade between China and the U.S. inevitably hurts both nations, but Chinese dependence on exports to the U.S. is greater than U.S. dependence on Chinese imports. The U.S. economy is growing rapidly and is better situated to absorb the negative effects of tariffs.

But the U.S. has some vulnerabilities as well. President Xi and other Chinese leaders typically stay for the long haul. President Trump is subject to a 50/50 election in 2020, and if he doesn’t win, a Democratic president could be willing to cut a better deal for Beijing. Stalling might be more costly for China in the short term, but not necessarily over the long haul.

China also wields a lot of influence over North Korea and can exercise this leverage positively or negatively to get a favorable deal. If China can help denuclearize the Korean peninsula, President Trump is likely to give more on the trade issues even if this is not an explicit part of a trade agreement. And he probably should.

There is one thing the U.S. could do to strengthen its position immensely. If leading Democrats like Biden and Sanders demonstrate unity with the President on this issue, it will send a strong message that the deal will not get better for China in 2020 regardless of who wins the White House. Of course, this issue creates a quandary for the Democrats. If supporting the President leads to a pre-election deal, then Trump gets a substantial political win on an issue pivotal to crossover Democrats and moderates. Standing with Trump on China will help his reelection effort.

I rarely agree with Chuck Schumer, but his recent support for tough negotiations with China is welcome. Wouldn’t it be great if the Democrats seeking the oval office could do the same? I’m not counting on it.

3 Comments

3 Comments

  1. hightex22  •  May 9, 2019 @6:13 PM

    There’s a lot of pressure on Trump to deliver a deal. Higher tariffs will start to take a toll on us if this continues..

  2. alex__  •  May 11, 2019 @7:30 AM

    Now we have 25% tariffs. Let’s get behind Trump to get a good deal.

  3. scottieQ  •  May 14, 2019 @11:28 AM

    More tariffs now, back and forth, we’re in a trade war, not good for trump or the economy

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