Explanation
I heard that the Chinese Communist Party and the Trump administration have won over announcing a trade deal. Both sides returned to their capital and promoted what they had achieved. Realistically, it was not a trade deal, but a ceasefire or hostilities.
The US and China were engaged in a continuous series of escalations that increased tariffs to triple digits and effectively acted as a trade embargo. This agreement consists of reverting customs duties to pre-escalation levels. As a result, it has been widely reported that the Trump administration has raised tariffs to 30%, which is inaccurate. The tariff levels for Chinese products are generally increasing from 55%, 25%, which is a widely reported 30%, and China is increasing tariffs on US products by 10%. All other retaliatory tariffs by both sides have returned.
Beyond that, little has been achieved. China agreed to discuss US concerns about fentanyl, but quickly said this was a US issue, not a Chinese issue. Both sides agreed to establish a working group or mechanism to negotiate further, but what exactly should be negotiated seems intentionally vague. China has resumed exports of rare earth metals after an earlier embargo. The US side has touted that China will open its markets for US products and reduce non-financial barriers, which is likely to be actively working to reduce its reliance on non-Chinese products.
So, given the ambiguous deliverables other than the end of retaliatory tariffs, what are we holding in the future for trade between us and China?
What the Trump administration is trying to achieve in China remains ambiguous. Looking at the actions taken away from the Swiss negotiations headlines, it is clear that they are trying to separate themselves from China and pressure others to do the same.
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Shortly before negotiations in Geneva, the US announced a trade agreement with the UK. Still, it included a near-US veto on China’s investment in the UK. Beijing not only registered complaints with the new contract, but continued to threaten other countries engaged in similar arrangements.
The Trump administration is urging other countries to adopt similar policies. The main points of attachment between Canada and Mexico are loose policies regarding money laundering, transship, drug enforcement and intelligence leaks involving China. South Korea and Vietnam have stepped up enforcement of transport detection. This follows financial sanctions against countries that sell Chinese-approved oil, such as Iran and Venezuela.
Domestic, the Trump administration is trying to boost investments aimed at re-grounding key industries. Private domestic investment was a record high, approaching $1.1 trillion in the first quarter. After considering the surge in imports trying to beat new tariffs, GDP would have risen significantly due to new investments. The administration appears to be seeking to ease business regulations in order to move a large number of businesses from their more risky partners to the United States.
Thus, releasing Washington’s desire to move away from the press and do business with Beijing, the US side appears to be focusing on lasers on decoupling from China.
Recent news reports featured backdoor software for power components, including solar panels and other devices that can be used to do a variety of things, such as knocking down a power grid. Given China’s aggressive work being separated from the US as well as from other countries, it seems wise to expect a change in China’s economic and security policy, but we prepare as if it weren’t.
This transaction should be considered an early step rather than an endpoint. It has yet to be seen where the Trump administration goes from here and what deals it has reached with China, if any. However, the action shows deep concern from the regime regarding China, with a desire to separate as much as possible.
The views expressed in this article are the views of the authors and do not necessarily reflect those of the epoch era.
