Free Trade

With Key Deadline Friday, Is the Trade War With China About to End?

Any deal will be better than the current mess, which is largely of Trump's own making.

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Martin H. Simon/picture alliance / Consolidated/Newscom

America's trade war with China may be nearing an end, but if anyone can snatch defeat from the jaws of victory, it's President Donald Trump.

Just days before Friday's March 1 deadline to reach a trade deal with China, the president gave us yet another glimpse of the hard-headed thinking that has pushed America into an economically damaging trade war and complicated his administration's efforts to end it.

The scene unfolded in the Oval Office as Trump and U.S. Trade Representative Robert Lighthizer fielded questions from the press during a meeting with Chinese trade officials. In response to one question about the so-called "memoranda of understanding" (MOU) that would be issued by the U.S. and China as part of a trade deal, Trump declared that he did not like signing MOUs because "to me, they don't mean anything. I think you're better off just going into a document."

That's when Lighthizer interrupted the president to issue a pretty stark correction. Actually, Lighthizer pointed out, the MOU is the contract that's signed by the two governments. "A memoranda of understanding is a binding agreement between two people," Lighthizer said. "That's what we are talking about. It's detailed, it covers everything in great detail."

Trump, however, refused to back down. "I disgaree. I think that a memoranda of understanding is not a contract to the extent that we want," Trump said, before asking Lighthizer to roll the MOU into "a final, binding contract" that would, somehow, be more significant.

A clearly exasperated Lighthizer tried to defuse the awkward situation by announcing to the press that the two sides would no longer use the term "MOU" to refer to the legal document outlining the prospective trade deal. Instead, "we're going to use the term 'trade agreement,'" he said, waving his arms frantically. "We're never going to use 'MOU' again."

In the midst of the disagreement, the top Chinese negotiator laughed out loud.

In the grand scheme of things, this spat between Trump and Lighthizer seems unlikely to derail whatever deal is being hammered out between trade officials from the world's two largest economies. Still, both the style—Trump's willingness to openly fight with his top trade official in front of the media and China's trade delegation—and the substance of the dispute highlight how Trump has jeopardized negotiations. As The New York Times put it last week, Lighthizer has been growing frustrated with "the president's superficial understanding of the trading relationship with China and his tendency to jump unpredictably into the fray."

With the White House now backing down from a months-long promise to increase tariffs on China on March 1 unless a deal is reached, observers seem increasingly confident that an agreement is near. Trump seems eager to sign a deal. He undercut Lighthizer again by declaring last week that the March 1 tariff deadline would be ignored, and signaled that he would be willing to meet one-on-one with Chinese President Xi Jinping later in March to hash out the deal. It's clear that policy details are not Trump's forte, and it's unlikely that the meeting between Trump and Xi will accomplish a more substantive deal than what could be worked out by the trade officials who at least understand what an MOU is.

That any deal could be reached at all is something of a minor miracle, given the many ways in which Trump has damaged relations between the U.S. and China. He pulled the U.S. out of negotiations over the Trans-Pacific Partnership (TPP) trade deal shortly after taking office because he saw the deal as being too beneficial for China—despite the fact that China was not part of the TPP, which was meant in part as a way to counterbalance China's growing influence in the region.

Since launching the trade war last year, Trump has repeatedly bragged about how tariffs on steel, aluminum, and other imported products are filling the U.S. Treasury with money paid by China. In reality, American importers and consumers are paying the higher taxes created by the tariffs, and the revenue generated by those levies has been canceled out by his administration spending $12 billion to offset losses incurred by American farmers as a result of the trade war—a policy that has had only mixed results.

Trump has repeatedly confused the difference between the federal budget deficit, which is the gap between the federal government's revenue and its spending levels, and the trade deficit, which is the gap between how much America imports and how much it exports. He's argued that revenue from tariffs are reducing the trade deficit, which is impossible since revenue from tariffs flows into the federal government and does not directly influence the trade deficit. Regardless, he's also wrong about either deficit being reduced—since taking office, Trump has presided over sharp increases in both the federal budget deficit and America's trade deficit with China.

And, as he demonstrated last week, Trump has little understanding of how the details of trade deals work—but seemingly endless confidence in his ability to reshape the global economy to his liking. He's the "Tariff Man" who doesn't understand how tariffs work.

The most likely outcome is probably one that satisfies Trump's desire to look like he accomplished something while letting China save face. That's why some observers of the negotiations are now predicting Trump and Xi will reach a "weak" deal that does not address China's abuses of intellectual property or the forced transfer of American technology. That's the outcome Lighthizer and other China hardliners are trying to avoid.

In many ways, that would be an outcome free-traders could root for. It would allow Trump to claim a political victory over China and give him a reason to lift the tariffs that are hurting mostly American businesses. Additionally, it would leave the U.S. in a position to challenge China's unfair trade practices in front of the World Trade Organization—where this whole dispute probably should have been taken in the first place—or to team-up with other major trading partners to resurrect the TTP and use it to apply market-based pressure on China.

The deal will have to be judged on its own merits, of course, but any deal has the benefit of bringing to a close the Trump administration's tragic comedy of unforced errors.

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  1. Any deal will be better than the current mess

    Any deal?

    1. Howie Mandel would beg to differ with this perspective

  2. “The deal will have to be judged on its own merits, of course, but any deal has the benefit of bringing to a close the Trump administration’s tragic comedy of unforced errors.”

    Speaking of unforced errors, that’s the point of this piece?

    It almost sounds like you don’t care whether the American economy suffers–just so long as Trump looks bad. Trump’s public faux pas are of no consequence.

    “The most likely outcome is probably one that satisfies Trump’s desire to look like he accomplished something while letting China save face. That’s why some observers of the negotiations are now predicting Trump and Xi will reach a “weak” deal that does not address China’s abuses of intellectual property or the forced transfer of American technology.”

    I’m not sure the comments in that article you linked are precisely as advertised.

    If the deal gets rid of China’s joint venture requirements, it may do a tremendous job of helping with forced technology transfers–regardless of whether the deal specifically says something about “intellectual property” or not.

    1. Any deal will be better than the current mess, which is largely of Trump’s own making.

      Boehm feels that this is all Trump’s fault.

      Its not massive trade restrictions on US goods and services that had anything to do with this trade situation.

      Its not Commies and Socialists wanted unfettered access to fantastic US markets but refuse US companies access or tax the shit out them.

      1. Boehm has the basic appeaser outlook.

        Take a crap deal because no deal might be worse to you than a crap deal.

        Of course, this ignores that the other side also has an interest in making a deal, and their desire to make a deal means you can do better than a crap deal.

        1. It’s the progressive approach, exemplified best by Obama:
          Bend over for foreigners as you stab your own people in the back.
          Boehm is typical

          1. +10

    2. Ken actually reads the posts so the rest of us don’t have to.

      1. God bless him

      2. The hero we deserve.

        1. Ya gotta respect the man who takes point.

    3. It almost sounds like you don’t care whether the American economy suffers

      Are you defending the American *economy* – or only a select group of politically connected businesses?

      Because the *economy* benefits from cheap imports – even ‘dumped’ at below cost of production. A small number of producers can’t make as much money because someone has chosen to sell at a low price but everyone who buys that material or the things made from that material – the vast majority of the country – benefit.

      1. Are you better off buying a refrigerator from your brother for an extra dollar, or saving the dollar by buying from Emperor Xi? You’re even better off if *both* you and your brother buy from each other, than from Emperor Xi.

        The principle scales.

        “Buy at the cheapest price” ignores any benefit to you from different producers getting the sale, and ignores the much greater benefit from a general marginal in group preference between Americans.

        Whether you like it or not, your economic success is significantly tied to the economic success of other Americans.

        We can tax Xi with a tariff so that we all spend a little more, while making our neighbors more money from our in group buying preference, or you can be taxed at higher income, corporate, and capital gains taxes to make up for the loss revenue to Americans.

        1. “It will generally be advantageous to lay some burden upon foreign industry for the encouragement of domestic industry, when some tax is imposed at home upon the produce of the latter. In this case, it seems reasonable that an equal tax should be imposed upon the like produce of the former. This would not give the monopoly of the borne market to domestic industry, nor turn towards a particular employment a greater share of the stock and labour of the country, than what would naturally go to it. It would only hinder any part of what would naturally go to it from being turned away by the tax into a less natural direction, and would leave the competition between foreign and domestic industry, after the tax, as nearly as possible upon the same footing as before it.”

          –Adam Smith

        2. “Whether you like it or not, your economic success is significantly tied to the economic success of other Americans.”

          The base theory of communism.
          Lemme know when you find the New Soviet Man who is willing to forgo his own welfare for the ‘betterment of the state’.
          You’re an idiot.

          1. “Adam Smith is a commie”

        3. “Buy at the cheapest price” ignores any benefit to you from different producers getting the sale, and ignores the much greater benefit from a general marginal in group preference between Americans.

          Even assuming you are right. Why shouldn’t I have the choice to forego those benefits if I wish? Why do you desire to force those “benefits” upon me against my will, via tariffs and taxes?

          1. “Why do you desire to force those “benefits” upon me against my will, via tariffs and taxes?”

            Taxes are *already* forced on you. Get over it, anarchotopia boy.

            The question is which tax regime benefits Americans most.

            Hint: it’s no the one where we enrich Emperor Xi.

            1. Get over it, anarchotopia boy.

              Wait, I thought I was a progressive statist. Which is it, Trump-humper?

              The question is which tax regime benefits Americans most.

              Oh that’s easy! The tax regime which benefits Americans the most is the one that leaves maximum choice in the hands of each individual taxpayer. Not a one-size-fits-all regime where everyone is forced to submit to some collective bullshit, where the state tries to force onto everyone what they think is best for everyone.

              Who knows what is best for you? Trump? Obama? Pelosi? Or – you?

              1. The tax regime which benefits us the most is the one that taxes us least. Choice doesnt really enter the equation from a taxpayer stand point.

        4. Are you better off buying a refrigerator from your brother for an extra dollar, or saving the dollar by buying from Emperor Xi?

          The only person who has any moral standing to evaluate whether any particular decision, under my control, makes me better off or worse off, is me.

          1. “The only person who has any moral standing to evaluate whether any particular decision, under my control, makes me better off or worse off, is me.”

            Absolutely correct. You and most everyone in the world makes choices thus. If people made choices based on the ‘welfare of humanity’, capitalism would have collapsed in 1989 instead of communism.

          2. Meh.

            Government makes all sorts of policy decisions that affect you. We’re are taxed. The taxes can have better or worse effects of Americans generally. I prefer better. It’s not all about you.

      2. “Because the *economy* benefits from cheap imports – even ‘dumped’ at below cost of production. A small number of producers can’t make as much money because someone has chosen to sell at a low price but everyone who buys that material or the things made from that material – the vast majority of the country – benefit.”

        Correct.
        Sevo’s law: When a third party sticks its nose in a transaction between two parties choosing to make that transaction, at least one, and likely both lose.
        Everywhere and always; no exceptions. If it were otherwise true, no one would make a transaction without that interference; the government is always willing to ‘help’. Which would mean there would never be a black market; ha and ha.

        1. If you took 3 seconds to actually think about the accounting involved – what money goes where – you’d see that saving 1% by buying from Emperor Xi causes losses a 100% loss to Americans, and they’re part of your tax base, not Emperor Xi.

          Government’s nose is already stuck in commercial transactions through taxation.

          It’s not all about your whimsy.

          1. I support your right to decide where you spend your money. If you wish to spend your money only on American-produced products, go right ahead.

            I oppose your desire to try to force everyone else to submit to your will.

  3. short-url

    Before leaving Washington to attend his summit with North Korean leader Kim Jong Un, U.S President Donald Trump tweeted that he would delay hiking tariffs on $200 billion in Chinese goods because of “substantial progress” during the talks between American and Chinese negotiators.

    I wonder if Boehm is correct or ABCnews about March 1 being the tariff increase deadline.

    If only was had journalists who reported the actual news instead of barfing propaganda and their inaccurate personal opinions.

  4. Trump negotiating tactic. 36DD chest, fit for a big boob.

    1. -1 For no accompanying pic

  5. I haven’t been paying attention (because I’m a Canadian), has the trade war really been a “mess” or is Boehm just hyperventilating again?

    1. What trade war?

    2. The biggest impact was felt after last year’s harvests. Demand has picked up again as the global economy shifts to affect it (China buys soy beans from somewhere else, meaning those suppliers don’t sell to other customers who in turn buy from the US). Nevertheless, it has been impactful, though humans can adapt. Should they have? Probably not.

    3. The biggest impact was felt after last year’s harvests. Demand has picked up again as the global economy shifts to affect it (China buys soy beans from somewhere else, meaning those suppliers don’t sell to other customers who in turn buy from the US). Nevertheless, it has been impactful, though humans can adapt. Should they have? Probably not.

    4. Eric Boehm, November 20, 2018, Hit & Run: “Stock Market Woes Worsen As Trade War Worries Grow
      The Dow Jones has lost 500 points since President Donald Trump launched his trade war.”

      Just a note: The Dow is up roughly 7% since Boehm hyperventilated this headline.

      Worst. Trade. War. Ever.

      1. People like Boehm absolutely depended on the economy going to shit, so all his opinions can be supported by a “told you so”.

        Unfortunately for him, the economy has gotten stronger and seems to be on a track to get even stronger before some market correction happens in the future.

  6. Say what you want about Trump, but the fat-headed moron who thinks he’s a genius sure is entertaining. And as long as you’re getting fucked by the government regardless, isn’t a laugh or two better than the dead-seriousness of the usual fat-headed morons who think they’re geniuses? Trump’s just paving the way for AOC, she’s even more entertaining than he is.

    1. Let’s hope that whoever follows Trump won’t be worse. Hopefully the Democratic candidate won’t be that bad. I’ll be voting for the Libertarian candidate next time anyhow. Trump has done an excellent job showcasing how the President has way too much power. And it is funny watching him, but painful too. Tariffs are taxes we are putting on ourselves. Always a stupid idea to vote for more taxes. How can anybody on this board thing these moves are smart? And if you think the “Art of the Deal” master is going to get China to stop their tech ripoffs, technology transfer/stealing requirements, and patent infringement, you are clueless. The “deal”, whenever it happens, will be a face saving nothing burger that will not do a damn thing about China’s bad behavior.

      1. Trump has done an excellent job showcasing how the President has way too much power.

        This much is true.

      2. How can anybody on this board thing these moves are smart?

        You must be new here.

        The majority of people here at the Reason comment sections are Trump-humpers or trolls.

          1. McGoop is a troll all right.

            Actually, he might be all Left.

        1. chemjeff radical individualist|2.28.19 @ 9:49PM|#
          “You must be new here.
          The majority of people here at the Reason comment sections are Trump-humpers or trolls.”

          Chemjeff is a resident lefty imbecile who suffers TDS.

          1. Please, Sevo. Explain precisely how I am a “lefty”.

            Because nowadays “lefty”, or “leftist”, or “progressive”, is thrown around the same way that “fascist” or “racist” tends to be thrown around: just as a slur devoid of meaning, equivalent to “doody-head”.

            1. “Please, Sevo. Explain precisely how I am a “lefty”.”

              We can start with your imbecilic statement above:
              “The majority of people here at the Reason comment sections are Trump-humpers or trolls.”
              Further, suffice to say, you and I have exchanges going far back; I’m sure I can safely say you support the left, statist, side of nearly any discussion we’ve had.
              I’m not about to waste time searching for specifics, but I’ll ask those who post here regularly to correct me if that is an incorrect characterization.

              1. you support the left, statist, side of nearly any discussion we’ve had.

                Pick one discussion where I supported the “left, statist, side”. Just one.

              2. “The majority of people here at the Reason comment sections are Trump-humpers or trolls.”

                And I’m sorry to say that this is nowadays a statement of fact. I wish it wasn’t the case.

                1. “Disqualifying asylum seekers because they raped children = Trump hugging”
                  vs
                  “Just because that guy rapes kids, he still deserves to be granted asylum in the US, because he’s OPPRESSED! If you disagree, you endorse OPPRESSION!”

                  Yep, I know which of those I choose – definitely not the latter.

                  You’re a sick, unhappy psychotic, chemjeff.

                  1. I can always count on you, Nardz, to be a sick unhappy troll.

                  2. Nardz won’t actually engage in the substantive issue, just demagogue and troll. That is because he is unserious about any discussion of ideas, he just comes here to spew his right-wing crap. He doesn’t give a fuck about liberty or libertarians, he comes here to shit on libertarianism, to push right-wing narratives, to pimp for Trump and Trumpian-style nationalism, and otherwise serve as a loyal footsoldier for Team Red.

              3. Chemjeff radical individualist used to be chemjeff among other socks.

                The fact that he posts Lefty narrative talking points and attacks anything Libertarian, provides clear evidence of something.

                1. Pick a discussion where I supported the “left, statist, side”. Just one.

                  1. Chemjeff, what are all your sock names again?

      3. “Hopefully the Democratic candidate won’t be that bad.”

        You’re a laugh riot!
        The least imbecilic D lost the election to Trump, for pete’s sake! Are you hoping they’ll find some janitor in the office with more brains than OAC, that idiot Bernie and fauxcahantus?

  7. Best. Negotiator. Ever.

    1. Trump got all our trading partners to talk about lowering trade restrictions when they first said that they would never talk.

  8. “Any deal will be better than the current mess, which is largely of Trump’s own making.”
    i.e.
    “I am the worst negotiator in the world”

  9. Relevant:

    The Economics of Autarky

    Here is a hint: Central planners and statists of all stripes love the idea of autarky. Because then they can have more control over people.

    1. “Adam Smith was a commie”

      “It will generally be advantageous to lay some burden upon foreign industry for the encouragement of domestic industry, when some tax is imposed at home upon the produce of the latter. In this case, it seems reasonable that an equal tax should be imposed upon the like produce of the former. This would not give the monopoly of the borne market to domestic industry, nor turn towards a particular employment a greater share of the stock and labour of the country, than what would naturally go to it. It would only hinder any part of what would naturally go to it from being turned away by the tax into a less natural direction, and would leave the competition between foreign and domestic industry, after the tax, as nearly as possible upon the same footing as before it.”

      –Adam Smith

      If we followed Adam Smith, tariffs would be a lot higher.
      Adam Smith on Tariffs and Taxes on Domestic Production
      “muh free markets”

      1. That’s because people back then had common sense…

        1. Oh look, it’s Mr. “Libertarianism Is The Way To Go” Vek endorsing tariffs and taxes…

          1. Taxes are perfectly Libertarian.

            The taxes would be super low of course, since government should be tiny and limited.

      2. You are perfectly emblematic of discourse on the right nowadays. Take an argument, and then dismiss it with a meme without even engaging in the substance of the argument.

        Autarky doesn’t work, it only empowers the statists and collectivists, and it makes us all less free and more poor. So no I’m not going down the path of autarky out of some schmaltzy appeal to patriotism. Feelings are not facts.

        1. I love that you get butt hurt if anyone dares to say you support the left, then immediately turn around and accuse everyone that disagrees with you of being a Republican or on the right (those two things aren’t mutually exclusive).

          And as a funding mechanism for the government, I’d much rather tarriffs and sales taxes over income tax any day of the week (cause let’s be honest, taxes are never going away.)

          1. I said “on the right”. And buybuy himself has said he is on the right. This isn’t a baseless smear, this is his own admission.

          2. “you support the left”

            I support “the left” in the same way I support Trump: when they do something that is good, I’ll praise them, but then and only then.

          3. Chemjeff has team Blue bumpstickers hanging out of every orifice that he has.

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