But as the president makes his case for a second term ahead of November’s election, he doesn’t have much to show for a bruising trade battle that has been a cornerstone of his foreign policy.
That uptick in the overall deficit probably has less to do with US-China relations than it does with the coronavirus pandemic, which stalled foreign trade as countries locked down their economies.
“The bottom line is that the tariffs caused a lot of collateral damage in the US and did not achieve their intended objectives,” said William Reinsch, a trade expert at the Center for Strategic and International Studies (CSIS) who served for 15 years as president of the National Foreign Trade Council.
A stalled agreement
“The case for Trump’s failure is clear,” Reinsch said. “You can see it in his failure to make progress on the so-called ‘structural issues’ that were the basis for [the administration’s] actions in the first place.”
“Those issues were all put off to phase 2 of the negotiations, which never began and now looks unlikely to begin,” Reinsch added.
China’s economy is rebounding strongly
But the trade conflict will likely still have some lasting consequences for China, according to analysts at JP Morgan.
“Uncertainties raised by the clash are prompting a reallocation of export capacity away from China, led by third-party manufacturers,” they wrote in a report last week. The analysts said the global pandemic shock has helped China maintain some of the manufacturing it would have otherwise lost this year, but that eventually there will be a “more regionally diversified supply chain, as other Asian countries provide attractive alternative locations.”
Looking past November
“The evolution of the US-China conflict after the election is likely to vary across a number of dimensions, including trade, technology, and the financial sector,” wrote the JP Morgan analysts, who suspect that tensions will continue even if Biden wins the election.
In that scenario, the analysts said they expect the relationship between Washington and Beijing to continue splintering as the two countries fight over 5G networks, quantum computing, artificial intelligence and biotechnology.
“In vying for dominance in these areas, the US and China have set about decoupling, reducing cooperation, restricting technology sharing, even shutting … down trade in some cases,” they wrote.
Reinsch of CSIS sees a similar future, adding that Trump and Biden would likely both be forced to pursue policies that encourage decoupling, albeit with their own style of governance.
“The reality is that the Chinese are not going to meet our demands, not because they’re bad economics — they’re not — but because they’re bad politics,” he said. “They would undermine the [Chinese Communist] Party’s control, which is the last thing the CCP will ever agree to.”
— Anneken Tappe contributed to this report.
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