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5 Reasons Why US-China Trade Tensions Won’t Be Fully Resolved Until 2024

Last Updated September 23, 2020 1:23 PM
Mark Emem
Last Updated September 23, 2020 1:23 PM
  • The Trump tariffs on China set for Dec. 15 are off, but it could take years before a comprehensive deal is reached.
  • China has promised to increase agricultural purchases for the umpteenth time.
  • It’s in both President Trump’s and President Xi’s political interests to offer a temporary reprieve to the trade war.

Even as he faces an impeachment battle, President Donald Trump’s reelection chances  are looking up based on various polls and surveys . A second term for Trump might suggest that U.S.-China trade tensions will finally be resolved. This is based on the assumption that China’s hand will be remarkably weakened by then. That couldn’t be further from the truth.

If anything, Trump’s second term could turn out to be another four years of wild market volatility based on Trump’s latest trade tweets.

Here are five reasons why you should be buckling up for another half a decade of U.S.-China trade tensions:

The status quo serves China well

Among the sticky issues that led to the U.S.-China trade war were the trade deficits, the forced transfer of intellectual property, and restrictions facing U.S. businesses seeking entry into the Chinese market. Obviously, China has benefited hugely from the uneven playing field.

Source: Twitter 

The situation demands to be remedied. But it is in China’s interest to prevent a drastic change and keep enjoying the advantages afforded by the status quo for as long as possible while trying to mitigate the negative impact. If China achieves this by dragging the negotiations for as long as possible while occasionally making concessions that don’t jeopardize its economic and technological ambitions, so be it.

Xi’s political life and legacy are on the line

Chinese President Xi Jinping has been in office since late 2012, and most of China’s economic milestones were achieved before he rose to the highest office. China’s ambitions for global dominance are now in full gear.

For Xi to undermine policies that have contributed greatly to the Chinese renaissance would be politically reckless. Recently, term-limits were removed by the Communist Party. Xi’s chances of serving for as long as he wants would not be guaranteed, however, if he displayed weakness in the U.S.-China face-off.

Trump is surrounded by hardliners

Before the U.S.-China trade war kicked off, Trump got rid of moderate voices in the White House who objected to his approach. Among them was former economic advisor Gary Cohn, who feared a trade war would obliterate the U.S. economy.

Now Trump’s policy team on the Chinese issue consists of more hawkish figures such as Peter Navarro, who famously wrote the Death by China book.

Trust issues

Under the deal reached by the two economic giants, the U.S. will halve tariffs imposed on Chinese imports . China, on the other hand, has committed to buying more U.S. agricultural goods. Such promises and commitments have been made by China before but never fulfilled.

So far, there’s no indication that this time it will be different. In July, Trump bemoaned this, saying:

[China] was supposed to start buying our agricultural product now – no signs that they are doing so.

Donald Trump
Source: Twitter 

Meanwhile, China has diversified its source markets for agricultural purchases. Argentina and Brazil have emerged as key beneficiaries of the U.S.-China trade war. This has been cited as the reason Trump recently slapped tariffs on Brazil and Argentinian steel.

Trump needs a punching bag for his next term

For much of his political career, Trump has thrived on having a figure that he can constantly attack and present to his supporters as the enemy that needs to be crushed. Three years in, and the U.S. political field is littered with political carcasses of rivals that once crossed his path. Another Democratic party loss in 2020 will deplete the field of rivals as Trump takes on legendary status.

But Trump, as he has proven, will need an enemy that can keep his base fired up, especially at MAGA-cum-KAG rallies. Efforts to bring China to heel in his second term would be the perfect way to keep his political instincts sharp and his base glued to the Trump show.