'Amazing deal' or 'capitulation'? Why the US-China trade truce may not last

Date: Monday, December 16, 2019
Source: The Guardian

Donald Trump hailed the agreement, but others think it masks a process of deglobalisation as the two superpowers struggle for hegemony

The trade war between the US and China may never be settled, experts fear, even after the two sides agreed on an outline “phase one” deal.

Economists and investors have been poring over the weekend’s announcement, which appeared to end a dispute that has roiled financial markets for 17 months.

According to Washington’s trade negotiator, Robert Lighthizer, China has agreed to buy up to $200bn in additional goods and services over the next two years on top of the amount it purchased in 2017.

The agreement would also require China to make “structural reforms and other changes to its economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange”. In exchange, Washington would roll back some tariffs on Chinese goods, which Donald Trump hailed as an “amazing deal”.

Neither side offered any detail on what the Chinese reforms might be, leading to fears that the deal will fail to resolve the key underlying conflict between the two superpowers. US Democratic senator Chris Murphy called the agreement a “total capitulation”.

Beijing confirmed that a deal had been made but its reaction was more muted. This is the fifth time that a resolution to the US-China trade dispute has been declared and, pointedly, official Chinese responses did not contain a commitment to a specific target on new agricultural purchases that Trump promised would hit $50bn.

Also, there are more rounds of talks to go before an official signing of this phase one deal. Beijing emphasised that the text needed to be legally vetted and translated into Chinese, suggesting that the terms were still not totally agreed upon.

Financial markets also betrayed unease that things could fall apart. Stocks on Wall Street and elsewhere were initially buoyed by the announcement, but slipped back when details were not forthcoming.

The glacial progress on the so-called “phase one” deal shows neither side wants to compromise and has exposed growing fault lines, threatening what one prominent economist calls the “deglobalisation” of the world economy.

It is now not only a battle over trade and intellectual property, but also one about the future of the rules-based system of international trade and which economic model will prevail. Sharp US criticism of China over human rights in Xinjiang and Hong Kong, Washington’s fears about technology company Huawei acting as a trojan horse in western economies, plus ongoing military tensions in the South China Sea, have added volatile layers to the conflict.

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