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Obstacles to a Trade Deal Come From Both Beijing and Washington

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Unread 05.17.19, 08:19 AM
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Obstacles to a Trade Deal Come From Both Beijing and Washington

On 05.16.19 02:34 PM posted by Riley Walters

It’s been almost two years since the U.S. and China entered negotiations,and those talks are still dragging on.

No one knows the true progress of these talks except for what’sbeen reported through anonymous sources, or the occasional update from theWhite House. But as things stand, the talks have not sufficed to stave off atrade war.

The Office of the U.S. Trade Representative has alreadybegun the process of levying a 25% tax on all things Americans buy from China.

As far as anyone knows, tensions are escalating, and Americanscan expect to see the current tariffs stay in place for at least another month,and even up to five more years. This process was always going to be difficultgiven the Trump administration’s desire to get China to change its ways.

But the obstacles to reaching an agreement and removing the tariffs may not be the agreement itself but may be coming from opposing in Washington just as much as from Beijing.

American analysts are all over the map in terms of how theU.S. should handle these negotiations—and their views don’t neatly conform to partyalliances.

There is a division among those who are “hawkish,” taking amore confrontational approach that opposes any commercial activity with China, andthose who believe that governments (including the U.S. government) should getout of the way of the free flow of goods and services.

To the extent this latter group recognizes Chinese abuses, theyprefer to address them within the rules and processes of the World Trade Organization.The former group, which cares little about the World Trade Organization, even decriesit as supposedly ineffective.

Between these groups are those who support the president’s aggressive approach to China, these tend to be experts in their fields, either in political science or security but not economics. The debate between the political scientists and economists over President Donald Trump’s trade tactics tends to boil down to a debate over negotiating tactics versus economic costs.

And then, there are the hard-bargainers, often made up of tradelawyers. This group ranges from protectionists to those seeking genuine changein China’s treatment of trade and investment. They ultimately want a deal, albeita very tough one. They align with the hawks in their low regard for the World TradeOrganization, yet are not naïve enough to expect or desire any kind of “decoupling”of the U.S. and Chinese economies.

Even within these various groups, debates are being had overthe time value of negotiations and the degree of economic pain. One popularargument is that short-term pain will lead to long-term gain. Another argumentis that in the long term, China’s economy will endure more pain than the U.S.

Yet either way, the U.S. economy still gets hurt.

The experts are also hindered in their advice to thepresident by his own apparent misunderstandings of the U.S.-China economicrelationship.

Whether it’s talking about the trade deficit with China,what sort of impact trade actually has on the U.S. and Chinese economies, orthe effects tariffs are having on either of our economies, the president seems misinformed.

This comes at a cost, because despite strong U.S. economicgrowth—with 3.2% annual growth for the first three months of 2019—tariffs arestill imposing a $1.4 billion-per-month loss for the U.S. economy. Meanwhile,China’s growth has been steady at 6.4%.

Where Are Negotiationsat Now?

Over the last few months, the media has closely covered the U.S.-Chinatrade negotiations. U.S. and Chinese officials have made several trips to visitone another, yet most of the news covering these negotiations tends to comefrom anonymous sources.

Even official sources seem an unreliable guide to figuring out where trade relations stand. Just days after Treasury Secretary Steven Mnuchin tweeted about how productive the negotiations were, the president contradicted him, setting up a new wave of trade tensions between the U.S. and China.

As of May 1, the U.S. had imposed 25% tariffs on $50 billion of Chinese goods, and 10% tariffs on $200 billion worth of goods (totaling $250 billion). China had imposed 25% tariffs on $50 billion of U.S. exports and between 5% and 10% tariffs on $60 billion of U.S. goods (totaling $110 billion).

As of June 1, the U.S. will have imposed 25% tariffs on all $250 billion worth of imports. Meanwhile, China is set to increase its tariffs on the $60 billion worth of U.S. goods between 5% and 25%.

In addition, the U.S. has begun the process of imposing atariff of 25% on an additional $300 billion worth of Chinese imports. Anycertainty we thought we had about progress in negotiations has now shut down.

Neither side has plans to hold official visits at this time. The next time Trump and Chinese President Xi Jinping will meet is at the G-20 Summit, in Osaka, Japan, at the end of June.

Though this could be a positive meeting, it’s unlikely toend the ongoing trade tensions.

The post Obstacles to a Trade Deal Come From Both Beijing and Washington appeared first on The Daily Signal.

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