China Eases Tariffs, but Trade Deal Possibly Delayed Until 2020 US Election

The United States-China trade war caused global markets to rise and fall based on the rumour of the day. One moment US President Donald Trump praises the process and tweets that a deal is imminent, the next he forecasts doom. After an October meeting between the two negotiating teams, a “phase one” deal seemed imminent, at least according to American officials. Yet on Dec. 3, Trump conveyed an alternate story, this time that an agreement could be pushed back until 2021. 

Markets React

“I have no deadline,” Trump said, speaking from London alongside NATO Secretary-General Jens Stoltenberg. “In some ways, I like the idea of waiting until after the election for the China deal.”

Both European and US markets tumbled with Trump’s comments with the Dow Jones industrial average sliding 400 points a mere two hours after the opening bell. Similarly, Asian markets declined with the Hong Kong-based Hang Seng down 1.3 per cent, Shanghai Composite 0.2 per cent, and Japanese Nikkei 255 closing down 1.1 per cent. 

Initially, both sides set a deadline of having a deal in place mid-November, but the month passed without one, offering only conflicting accounts on the status of negotiations. On Dec. 15, the Trump administration is set to leverage more tariffs on $160 billion worth of goods, this time on shoes, televisions, and laptops. Whether or not that happens is left to Trump’s mood on Sunday. He has shown in the past that he is willing to delay tariffs as he uses them as bargaining chips. However, China would need to offer a concession in return, which it might have done Friday. 

The Chinese Ministry of Finance said it would reduce the 25 per cent tariffs on American soybeans and pork. American farmers have endured the brunt of damage from the trade war with a 44 per cent drop in shipments in 2019 compared to the previous year. Although US farmers have increased sales to other markets, global sales are predicted to be 22 per cent lower than in 2017.


Washington approved $28 billion in bailout for the agricultural industry to offset lost revenue and the actual effect could net farmers more than the decreased sales. 

“It’s clear that the payment rates overstated the damage suffered by soybean growers,” said Joseph Glauber, the US Department of Agricultural’s former chief economist. “Based on what the studies show, the damages were about half that.”

Even though Glauber’s assessment paints a more optimistic view of the situation, the future is less clear. Farmers may be satisfied with the bailout now, but what happens next year when they are in the same position? Does the US government issue another round of bailouts? 

China’s concession to reduce tariffs on soybeans and pork was met with praise from agricultural associations, but without a longterm trade agreement, those tariffs could rise as quickly as they fell. In October, China pledged to buy more agricultural goods, but it has been known to renege on those sorts of promises before. Beijing’s trustworthiness is one reason why American farmers continue to stand with Trump even as his policies hurt them. 

Blame Game

“The Chinese do not play by the rules,” an Illinois farmer said. “They cancel shipment orders that are not in their favour. They continue to steal our patents. Only President Trump has tried to stop these unfair trade practices.”

Farmers also recall the mad cow scare of 2003 when China cancelled all imports of US beef for 14 years. In short, farmers generally hold a negative view of China, even before the trade war began. On the other hand, it is a market too large for them to ignore. To them, Trump represents the kid in school who is willing to stand up to the bully even if he is hurt himself. 

The US presidential election is only 11 months away and under normal circumstances, it would make sense for an issue of its magnitude to be a central point of debate between Democrats and Republicans. The topic of China is unique in American politics, however, as both sides agree something must be done to counter Beijing. Both parties overwhelming supported the Hong Kong freedom bill and agree that China must do more to curtail intellectual property theft.

Although Beijing hoped hurting farmers would turn some of them from Trump, whom they immensely supported in the 2016 election, that desired effect has been limited in scope. In an August poll, Reuters/Ipsos found half of rural Americans approve of Trump, which was above the national average of 41 per cent. 

From a certain standpoint, the US is doing well economically with a 3.5 per cent unemployment rate and increased hiring in November. When farmers hear of record stock performance, even if their financial situations are weaker, how can they blame Trump? It is easier and more convenient to blame Beijing. In this way, Trump supporters can escape holding themselves responsible for electing a president who has hurt them. 

The stock market performance is the main reason why Democrats cannot leverage the trade war against Trump in the election. Although the economy has risen linearly since the 2008 recession, the fact remains that Trump is leading America during one of the most prosperous periods in US history, prosperous at least for American big business. Then, there are a host of other issues which are easier to hit Trump on, such as Russian ties, the Ukraine scandal, deregulation of industries, healthcare, and Iran. 

Trump floating the idea of waiting until after the 2020 election for a trade agreement allows him to use it as leverage. He can sell himself to voters as the only leader who can seal the deal and advertise how he has China on the ropes, but just needs a little more time. And there is truth to the fact that Trump was the only American leader to take on China economically. A trade deal, much like negotiating with North Korea, is no longer a priority, but simply a card Trump can play when it is most convenient.