Until trade tensions are resolved, U.S. businesses are unlikely to suffer until the future, after Trump keeps his promise to liberalize trade. U.S. companies are now launching an expensive project to move supply chains out of China. Tariffs imposed by the United States and China on imports from each other have decimated bilateral trade in 2018 and 2019. The Trump administration negotiated the legal text of the Phase 1 agreement to force China to buy an additional $200 billion of U.S. goods and services in addition to 2017 (not 2019) if bilateral trade was more robust.2 The legal evaluation of the agreement therefore requires a comparison of 2020 with 2017. Trump`s failure to deliver on this key issue is unlikely to concern him in November. He can easily blame the coronavirus for breaking his plans to liberalize trade between the United States and China.
If he wins a second term, his stance toward Beijing will only harden, but after COVID-19 has shaken the U.S. economy this year, voters may indeed want a firm president against a country that has cut off its economic prospects. Other factors also thwarted the conclusion of the U.S.-China trade agreement. Hong Kong`s new national security law has complicated relations between the two countries, in addition to restrictions on American journalists, the treatment of Uighur Muslims and security measures in Tibet. However, in the run-up to the U.S. election, evidence indicates that the agreement is not keeping Trump`s promise.1 The latest official data show that China is not up to expectations and is only reaching 53 percent of the expected purchase target by September 2020. Indeed, Chinese imports of U.S. goods are now weaker than before Trump`s trade war with a flash of U.S. tariffs on Chinese goods in 2018.
The United States and China must resume negotiations on important policies that are not affected by the first phase agreement. Trump`s trade war has failed to address what really concerns U.S.-China trade relations. It is time for a new approach. From the beginning, an additional $200 billion in sales to China were a worrying goal. Nearly 30% of U.S. merchandise exports to China are not even covered by the Phase One agreement. And for those who covered the agreement, a review of 15 product groups shows that their sales to China have been influenced by various factors, including plane crashes, epidemics of outbreaks, export controls, World Trade Organization (WTO) legal decisions, the lingering effects of trade war tariffs and the pandemic. 7. See US Trade Representative and US Department of Agriculture, Interim Report on the Economic and Trade Agreement between the United States of America and the People`s Republic of China: Agriculture Trade, October 23, 2020. This report contains data on projected U.S. exports – not actual U.S. exports under the legal text of the trade agreement – based on weekly sales data for certain agricultural products reported to the Department of Agriculture.
A conclusion drawn from the data is obvious. The Americans suffered when China`s retaliation devastated U.S. exports. Trump`s rate hikes have increased prices for U.S. consumers and costs for U.S. businesses. His politically motivated buying commitments may have caused more problems than they solved. After the election, the United States needs a new approach to solving its trade problems with China. As of September 2020, China had purchased only 53% of what was expected at this time of year (Chart 1, Panel a).3 Imports of all covered products were only $65.9 billion compared to a target of $124.9 billion. Up to three-quarters of 2020, China had bought only more than a third of what it had promised in the Trump deal that