Trump backers fear he's deserting them on China

May 22, 2018

So much for that showdown with China over its trade abuses. 

The Trump administration and its counterparts in Beijing continue rapidly deescalating their confrontation, with the U.S. reportedly agreeing to a deal to drop severe penalties on Chinese telecom company ZTE as the Chinese consent to removing billions of dollars in tariffs on American agricultural products. Further, the Chinese foreign ministry said Tuesday it will follow through with an April pledge to slash tariffs on American cars, cutting the import duties from 25 to 15 percent.

May 22, 2018 | Washington Post]

The two sides are still working out the terms of the ZTE agreement, The Wall Street Journal’s Lingling Wei and Bob Davis report. But the rough outline revolves around the U.S. removing a seven-year ban on the export of parts the company needs to stay in business in return for ZTE shaking up its management and potentially paying steep fines. The decision on autos, meanwhile, is likely to offer limited upside to American carmakers, since imports only account for about 4 percent of car sales in China and the move will also benefit "European and Asian manufacturers from Daimler AG to Toyota Motor Corp," Bloomberg notes.

What's notable in the flurry of activity is what the Trump administration is not prying from the Chinese: Namely, any changes to its deep-rooted program of abusing U.S. intellectual property, otherwise strong-arming American companies doing business there and providing anti-competitive support to domestic industries. Demands that China curb those practices lay at the heart of the case the Trump administration had been building.

Even before the overnight developments, Trump supporters — and those cheerleading his get-tough approach to trade with China — began reckoning with the likelihood that the president is abandoning the cause. 

Trump all but confirmed he’s backing away from a showdown with the nation’s leading economic rival in a series of tweets Monday. Trump’s tell: Rather than pledging to keep up the pressure on Beijing, the president began declaring a premature victory over a deal not yet sketched in pencil. 

“It gives the appearance of waffling,” says Dan DiMicco, the former chief executive of steel producer Nucor and a Trump trade adviser who oversaw the transition team’s work on the issue. DeMicco pointed as the first signs of trouble to the president’s decision to back off the crackdown on ZTE and then naming Treasury Secretary Steven Mnuchin to lead talks with Beijing. 

“All the Chinese want to do is maintain the status quo, so they can keep stealing and cheating,” he says. “President Trump was elected to stop that … I still believe he’s going to take care of it. But these delays seem to be playing into China’s hand. We’ve been doing the same thing for 25 years.”

Stephen K. Bannon, Trump’s former political strategist, expressed similar alarm. In a Monday interview with Bloomberg News's Kevin Cirilli, the onetime keeper of the “America First” flame also blamed Mnuchin for the administration’s turn toward Beijing. Trump “changed the dynamic regarding China, but in one weekend Secretary Mnuchin has given it away,” Bannon said. “You might as well have Hank Paulson doing this.” 

“For him to say the trade war is 'on hold?' It misses the central point,” Bannon continued. “They’re in a trade war with us and it hasn’t stopped. Mnuchin has completely misread the geopolitical military and historical precedence, and what President Trump had done was finally put the Chinese on their back heels.”

Sen. Marco Rubio (R-Fla.) likewise criticized the Trump's accommodation and said he will push congressional action to head it off: 

Other critics of the administration’s softening say the rapproachment fails to make a dent in rampant Chinese trade abuses.

U.S. Trade Representative Robert Lighthizer catalogued those practices in a March report. It described a Chinese campaign of plundering American intellectual property to assist the country’s bid to dominate the fields of robotics, electric vehicles, aerospace, artificial intelligence and others. Scott Paul, president of the Alliance for American Manufacturing and a champion of a tougher approach to China, said he “can’t escape the feeling that the administration got somewhat played this round.” 

“The question for me is what did we get out of it?” Paul says. “There’s a lot of work to be done and we may have given away the best leverage point we had for a long time, which is the threat of tariffs.” And he said if Trump has lost DiMicco, “he’s lost his base on trade.” 

That depends on the definition of Trump’s base. Fred Bergsten, founding director of the Peterson Institute for International Economics, agrees the administration is missing an opportunity to confront structural issues. But he sees the president maneuvering toward a political win as Beijing looks primed to break out a checkbook for more American agricultural and energy products. “He’ll be able to go to Des Moines and say to the farmers, ‘You were afraid you were going to lose sales because of tariffs. Now you’re going to gain sales.’ ”

Bergsten gives credit to China for accurately assessing that Trump is mostly concerned with narrowing the bilateral trade deficit. “They’ve read him correctly in terms of what they can do to assuage him at the least cost to themselves. We’re talking about a managed trade solution, where the Chinese buy more soybeans from the U.S. and fewer from Brazil, more aircraft from the U.S. and fewer from Europe, more semiconductors from the U.S. and fewer from Japan. That’s relatively easy for them to do,” he says.

For the United States, Bersgsten says that it has the virtue of averting an escalation of the conflict. “Any serious effort to get the Chinese to abandon [its industrial policy] would have failed, Trump would have retaliated, and we would have had a trade war. Given the realistic counterfactual, this is not a bad outcome.”

The Wall Street Journal's Greg Ip writes that China is winning, in part because Trump's "own tolerance for pain appears limited. Though the U.S. depends much less on exports to China than the reverse, China targeted farm exports from Republican states important to the outcome of November’s midterm elections. That may explain why U.S. officials have prioritized avoiding Chinese retaliation. China still holds the weaker hand in this trade dispute—but it has played that hand far better."

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