The Trump administration seems to have reached terms with Beijing over a Phase One China trade deal, which President Donald Trump will surely tout as a victory for himself and the United States.
But if the president strikes the deal on the terms being reported, he will actually be making a huge concession to Beijing that achieves few U.S. goals, and is so bad that even Trump will have trouble spinning it as a political win.
On Thursday afternoon, several media outlets reported that the United States and China have agreed to a limited interim trade deal that will surely boost markets in the short term and provide a temporary de-escalation of the U.S.-China trade war.
For more than two months, sources briefed on the negotiations told me, the two sides had been stuck. The Trump administration wanted to freeze tariffs in exchange for Beijing agreeing to purchase more U.S. agricultural products and granting more market access for U.S. financial firms. But China wouldn't sign off, demanding the White House sweeten the pot by offering substantial tariff rollbacks as well.
On Thursday, The Wall Street Journal reported the Trump team caved on that huge point. If true, the result would be a deal that immediately relieves major pressure on the Chinese economy in exchange for future promises the Chinese side may never fulfill. Beijing's concessions also don't address the bulk of the structural issues and abuses that make Chinese economic aggression a long-term threat to the U.S. economy.
We know that no Trump decision is final until he announces it. He could still reject what his officials have brought him.
Some reports said the interim deal includes some promises by Beijing to better secure intellectual property rights. But China has made and broken such promises many times before.
The conventional wisdom is that Trump is prioritizing his re-election prospects and needs a big win to brag about on the campaign trail. That's why he is lowering his terms for a deal. The Phase One deal was already a huge concession compared to the more comprehensive deal the two sides were closing in on in May.
As the election nears, the pressure on Trump to keep the market up and avoid any crises will only increase. Beijing knows that, and it's calculating that the U.S. president will have little leverage if China doesn't hold up its end of the bargain.
A bad deal is worse than no deal. That's why Trump was right when he said last week he likes the idea of waiting until after the election to make a deal with China.
If he gets re-elected, Trump will have all the leverage in the world to do what he's wanted to do for more than 30 years: finally stop China from taking advantage of the U.S. economy. But if he gets played now, the best and perhaps last opportunity to pressure Beijing to really change its bad economic behavior could be lost forever.
Editorial on 12/14/2019