It Takes Two to Tango: Are Washington and Beijing Dancing to a New Trade Agreement?

(Photo by Alex Brandon, Associated Press)

Rob La Terza

On September 11th, China announced tariff exemptions on a set of US products, notably anti-cancer drugs [1]. In a White House meeting, President Trump commented that the move was “pretty good” and seemed to express hope that the dispute may reach a resolution soon, saying “I know them and I like them, and I hope we can do something.” [2].

Trump responded to China’s tariff exemptions by tweeting that he would delay a tariff increase from 25% to 30% on $250 billion worth of Chinese goods from October 1 to October 15 [3]. The President called the delay a “gesture of goodwill” and said the move was requested by Liu He, China’s Vice Premier and its top trade negotiator. Liu requested the delay to recognize the People’s Republic of China’s 70th anniversary on October 1.

Chinese media has argued that the tariff exemptions are meant to benefit the Chinese people rather than serve as a concession to the US, with CCTV saying, “The purpose of imposing tariffs on US imports is to safeguard China’s core interests and the fundamental interests of its people. China is firmly opposed to escalation of the trade war and will not resort to countermeasures for the sake of countermeasures.” [1]. Regardless of the intent behind China’s tariff exemptions, commentators have expressed tempered optimism for October’s trade talks. Height Securities analysts writing “Despite this more positive tone, we continue to doubt that a truly comprehensive deal is in the offing in the near future, but do expect that the October meeting could result in additional tariff delays,” [3]. The tariff exemptions and Trump’s response to them have also heartened investors, with the Dow Jones Industrial Average rising 130 points as of 12:51 PM on September 12, after Trump announced the delay of the October tariffs [4].

This relative easing of tensions comes as an influential Democrat in Congress, House Appropriations Committee Chair Nita Lowey, blocks President Trump’s federal bailouts for farmers [5]. Trump has utilized bailouts to ease farmers’ financial hardship inflicted by the trade conflict. Lowey has blocked funding for the bailouts by choosing not to include it in a continuing resolution to fund the US government through November 21. Trump has been able to provide bailouts without Congressional approval by using the Commodity Credit Corporation (CCC), a holdover from Franklin Delano Roosevelt’s 1930s New Deal [5]. The Department of Agriculture can pay up to $30 billion annually from the CCC fund, but the administration is approaching that limit. Further bailout funding would require Congressional approval. Some Democrats have criticized the bailouts by saying they disproportionately benefit the wealthy, which would make bailout funding a controversial addition to the budget authorization. Democrats are seeking to ensure the budget is passed quickly and avoid a government shutdown by maintaining the status quo [5]. The lack of Congressional funding places pressure on Trump, who promised $16 billion more in bailouts this June when only $7.7 billion remained in the CCC fund [5]. Farmers are a key constituency for Trump, who is facing a difficult reelection campaign in the coming year.

For its part, China is facing economic pressure due to drastically increasing pork prices, which have risen an average of 46.7% between August 2018 and August 2019 [6]. Pork is the most-consumed meat in China, meaning that consumers and pork vendors will feel significant pain [6]. The shortage is the result of an outbreak of African swine flu which has wiped out between a third and half of China’s livestock [7]. Under normal economic circumstances, China would be able to make up for the shortage by purchasing pork from the US, but China has stopped buying US agricultural products due to the trade conflict [7].

The relative easing of tensions combined with mounting pressure on Trump over farm bailouts and increasing pressure on China based on rising pork prices provide reasons for optimism about October’s trade talks. The longer the trade conflict stretches on, the more clearly it shows that trade wars benefit no one. Neither country has benefitted from the pain they are inflicting on each other. Though unlikely, a deal reestablishing Chinese imports of American agricultural goods could solve both countries’ problems. As stated by Height Securities analysts, it is more likely that the October trade talks will only result in more tariff delays, but even that outcome could be the first step towards resolving the conflict. As always, nothing is guaranteed at this point.

Rob La Terza is an intern in The Carter Center’s China Program. The views expressed are those of the author and do not represent those of The Carter Center. 

[1] Bill Bishop “China and 9/11; China Tariff Exemptions Not a Concession; Internet Censorship to Tighten; Huawei.” Sinocism. Accessed September 12, 2019.

[2] Christopher Nelson. “The Nelson Report.” The Nelson Report, September 11, 2019.

[3] CBS/AP. “Trump Delays China Tariff Increase by 2 Weeks as ‘Gesture of Good Will.’” CBS News. CBS Interactive, September 12, 2019.

[4] Uday Sampath Kumar. “Wall Street Gains on Easing Trade Concerns, Euro Zone Stimulus.” Reuters. Thomson Reuters, September 12, 2019.

[5] Jeff Stein. “Top Democrat Attempts to Block Trump from Paying Farm Bailout Money, Setting up Battle over Trade War Tactics.” The Washington Post. WP Company, September 12, 2019.

[6] Liu Jiefei. “Update: Surging Pork Prices Fuel Consumer Inflation in August.” Caixin Global, September 10, 2019.

[7] James Palmer. “Foreign Policy China Brief.” Foreign Policy China Brief. Foreign Policy, September 11, 2019.