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BEIJING – The trade war between the United States and China will not go away under the presidency of Joe Biden.
Biden won’t take on Beijing right away, economists say, because he wants to focus on the coronavirus and the economy. But he seems set to renew pressure on the trade and technology complaints that led President Donald Trump to raise tariffs on Chinese imports in 2017.
Negotiators could tone down Trump’s focus on reducing China’s multi-billion dollar trade surplus with the United States and push harder to open up its state-dominated economy, which is more important in the long run, economists say. But no abrupt tariff cuts or other big changes are expected.
“I think Biden will focus more on trying to achieve structural reforms,” said Louis Kuijs of Oxford Economics. “It’s going to take some time before we have any explicit changes or announcements.”
Biden is evaluating tariffs on Chinese goods and wants to coordinate future steps with allies, White House spokeswoman Jen Psaki said Monday. He gave no indication of possible changes.
“The president is committed to stopping China’s economic abuses,” Psaki said.
Learning from Trump
A spokesman for the Chinese Foreign Ministry, Zhao Lijian, called on Washington to learn from Trump’s “wrong policies” and adopt a “constructive attitude”, but gave no indication of possible changes by Beijing.
“Cooperation is the only right option for both sides,” Zhao said on Tuesday.
Trump acted on grievances shared by Europe and other traders, but Washington has little to show for its hard-hitting war. It brought President Xi Jinping’s government to the negotiating table, but it stirred up world trade, raised consumer prices and eliminated jobs.
The last big event was a year ago, when Beiing promised in the January 2020 “Phase One” deal to buy more soybeans and other US exports and to stop pressuring companies to deliver technology.
China fell short on those purchases. Amid the coronavirus turmoil, it bought about 55 percent of what it promised. When it comes to technology policy, some economists say those changes are important, but wonder if they count as a victory. They say Beijing could have made them anyway to suit its own plans.
Land change
China faces more opposition than ever in Washington due to its trade history, territorial disputes with neighbors, repression from Hong Kong, reports of abuses against ethnic Muslims and accusations of technology theft and espionage.
“The terrain has changed significantly,” said Nathan Sheets, former Treasury undersecretary for international affairs in the Obama administration.
Katherine Tai, Biden’s choice to succeed US Trade Representative Robert Lighthizer, made a tough note on China in a speech this month.
“We are facing increasing competition from an ambitious and growing China,” said Tai. “A China whose economy is run by central planners who are not subject to the pressures of political pluralism, democratic elections or popular opinion.”
That means China has to make changes if it wants to make progress, said Raoul Leering, a global trade analyst at ING. He said that while many of Trump’s statements were “almost nonsense,” he was right that China has more trade barriers and official intervention in the economy than the United States.
“It will be up to China, the speed at which they reform and change policies, to see if Biden will remove trade barriers,” he said.
After two and a half years and 13 rounds of talks, negotiators have yet to address one of the biggest irritants for China’s trading partners: the status of politically favored state-owned companies that dominate industries from banking to oil to telecommunications. .
Europe, Japan and other governments have criticized Trump’s tactics, but echo complaints that Beijing steals technology and breaks promises of market opening by subsidizing and protecting companies from competition.
Those complaints strike at the heart of a state-led development model that Communist Party leaders see as the basis for China’s success.
Long-awaited gesture
They are forming “national champions,” including PetroChina Ltd., Asia’s largest oil producer, and China Mobile Ltd., the world’s largest telephone operator by subscribers. In 2013, the party declared the state industry the “core of the economy.”
Outside of the state sector, the party is fostering competitors in solar power, electric cars, next-generation telecommunications, and other fields.
Beijing could offer to give up its claim to being a developing economy, a status it insists on despite having become one of the largest manufacturers and a middle-income society, Leering said. According to the rules of the World Trade Organization (WTO), this allows the Communist Party to protect industries and intervene more in the economy.
Giving that up “would be a very important gesture,” Leering said.
Trump’s first attempt in 2017 was a $ 360 billion tax increase on Chinese imports. Beijing retaliated with tariff increases and suspended soybean imports, hitting agricultural states that voted for Trump in 2016.
The United States’ trade deficit with China narrowed 19 percent in 2019 from a year earlier and 15 percent in the first nine months of 2020.
That fell short of Trump’s goal of moving jobs to the United States. Instead, importers moved to Taiwan, Mexico, and other suppliers. The total US trade deficit narrowed slightly in 2019 and then increased by almost 14 percent through November last year.
Scorekeeper
Meanwhile, the Congressional Budget Office estimates that rate increases cost the average American household nearly $ 1,300 last year. Businesses postponed investments, undoing some of the benefits of Trump’s 2017 corporate tax cut.
A study by the China-US Business Council and Oxford Economics found that the US economy lost 245,000 jobs due to tariffs. He said that even a modest reduction would create 145,000 jobs by 2025.
Trump increased the pressure by cutting off access to US technology for telecommunications equipment giant Huawei Technologies Ltd. and other companies that US officials see as potential security risks and a threat to US industrial leadership. Americans who sold shares of Chinese companies that Washington says have ties to the military.
The Communist Party responded by promising to accelerate its two-decade campaign to make China a self-sufficient “technological powerhouse.”
Psaki, the White House spokeswoman, said Biden was reviewing those issues as well, but gave no indication of possible changes.
Biden wants to hold Beijing accountable for “unfair and illegal practices” and make sure US technology does not facilitate its military development, Psaki said.
Zhao, the Chinese spokesman, called on Washington not to “politicize or weaponize” science and technology and to avoid “unfounded accusations to smear China.”
Biden’s envoys have the option to adjust Trump’s sanctions by removing some in exchange for changes in Chinese policy, Kuijs said. But he and other economists say that reducing tariffs and restricting access to technology and financial markets is not a priority.
“It is difficult to see a US reversal of recent aggressive trends in China policy,” said Sylvia Sheng of JP Morgan Asset Management in a report.
Technological restrictions are unlikely to be eased because Washington “views China as a competitor,” said Tu Xinquan, director of the Institute for WTO Studies at the University of International Business and Economics in Beijing.
Tariff cuts appear to be the only short-term option, Tu said. He said that Biden could advocate eliminating taxes that the WTO says were incorrectly imposed.
“In that case, he wouldn’t lose face,” Tu said.
