David Chance: ‘Don’t expect peace from Trump’s ‘incredible deal’ with China’
President Donald Trump and the White House have prior form on trade deals with China. And given Mr Trump’s obsession with stock markets, you could be forgiven for assuming all he cared about was Monday’s market rally.
Over dinner at the weekend, President Xi Jinping agreed a three-month truce with Mr Trump that averted the threat of an increase to 25pc from the 10pc duties imposed on $200bn of imports from China.
So far, so good. The last thing the world needs at the moment as global economic growth heads south is a trade war between the world’s largest economies, and one that American consumers will end up paying for via higher prices.
We have been here before, however.
In May, Mr Trump was touting a deal in which he said China had agreed to import an additional $200bn of US goods.
“They are meeting many of our demands,” White House economic adviser Larry Kudlow said after the meeting between officials from the two countries.
The problem was that no one had told the Chinese and within weeks the ‘deal’ was dead.
By October, the same Larry Kudlow was telling reporters that China’s leaders “have made a decision not to do anything”.
A three-month moratorium is simply too short a period of time due to the complexity of the talks – especially as there have been no meaningful negotiations between the two sides since the May deal collapsed in acrimony.
“Officials now face the difficult task of fleshing out a deal that is acceptable to the Chinese but also involves significant enough concessions not to be torpedoed by the China hawks in the Trump administration,” said Julian Evans-Pritchard, senior China economist at Capital Economics.
He may be understating the difficulties given Mr Trump’s hodgepodge of advisers who lack a consistent approach.
Even in ‘normal’ times, it takes 18 months for the US to negotiate a free-trade deal and three-and-a-half years for it to implement one.
Trade deals are horribly complex. A US trade deal with Israel in 1985 was 7,000 words long. Twenty years later, a deal with Singapore was a whopping 70,000 words.