Trump, Xi Resume Negotiations Putting Trade War on Hold
The G20 summit concluded this weekend in Osaka, Japan. US President Donald Trump was the center of several controversies and discussions, not limited to Russian interference in the 2016 presidential election, climate change, and US support for Saudi Arabia in the Yemen Civil War. The main focal point, however, was Trump’s meeting with Chinese President Xi Jinping.
Following hours of negotiation between the two presidents, Trump announced that they would put the trade war on pause and agree to resume discussions. To be clear, this does not translate to immediate tariff relief as neither side agreed to back down. There is one small victory, however, for China as Trump appears to have agreed to remove part of the ban on Huawei.
After taking his Asian counterpart to task over what many have deemed unfair trade practices, Trump set about imposing tariffs last summer on $50 billion of imports, then on $200 billion worth of products. China had responded in kind, slapping American goods with tariffs of its own, while also appealing to the World Trade Organization for recourse.
Ahead of the G20 summit, he taunted that he may target the remaining $325 billion of goods not covered under previous tariffs, a punishment for stalled diplomatic negotiations. While every tit-for-tat by each side has had an effect, Trump’s banning of Huawei products has been the most newsworthy, in that by declaring a national emergency, he effectively crippled one specific company single-handedly.
Huawei had just overtaken Apple to become the second-largest smartphone maker when Trump labeled it a national security risk in May. While its devices are more popular in Asia and Europe, they were made possible through American companies such as Intel, Google, and Qualcomm. After signing an executive order, Trump essentially not only banned Huawei devices and network equipment, but also forbid American companies from transferring or selling technology to the tech giant. Unwilling to risk penalties, companies that had previously formed strong business relationships with Huawei began to quickly abandon ship.
Making the situation worse, Trump’s order came during a time of early 5G network expansion. Companies and governments across the globe are laying the groundwork for the next generation of mobile networks. Doing so requires equipment and infrastructure, which happens to be Huawei’s specialty. While it may be known for known for its handheld devices, Huawei rose to international prominence by building networks across Europe, beginning with Vodafone and British Telecom. Like its smartphones, Huawei’s network technology often fares much cheaper than its competition.
Leading up the White House ban, the Trump administration had already begun to pressure its allies to follow suit. By portraying Huawei as a national security risk, Washington managed to convince Australia, New Zealand, and Japan to blacklist the company. Furthermore, investigations were launched in Germany, the UK, and Canada, most of which led to no solid evidence of Huawei acting as an agent of the Chinese government, but some restrictions were imposed nonetheless.
All of these factors forced the company into a downward spiral and increased pressure on Beijing to find an amicable solution to the trade war. Judging by Trump’s response following the meeting in Osaka, it seems that the Chinese government was finally able to find the right words to convince him to lift the ban, at least in part. According to Trump, American suppliers such as Intel and Qualcomm could once again resume selling its components to Huawei. While he said that a discussion with China about the issue would come at a later date, this concession at least provides mild relief, and will allow Huawei to make its smartphones once more. Without sourcing goods and technology from outside suppliers, it would have been forced to create practically everything, from the software to the chips, by itself, a next to impossible mission for any smartphone manufacturer.
Senate Minority Leader Chuck Schumer did not take too kindly to the idea of backing off of the Huawei ban so quickly. Although a Democrat typically opposed to Trump, the company is “one of few potent levers we have to make China play fair on trade.” Furthermore, if Huawei posed such a strong risk to not just national security, but that of allies as well, it doesn’t make sense to remove the ban so quickly. More than anything, doing so discredits the Trump administration and its risk assessment. While the ban was always presumed to be more about trade than security, its removal only confirms that sentiment.
For its part, China has agreed to buy more agricultural products, according to Trump. Beijing has often targeted the US agriculture industry, as farming states have shown more support for the president, especially during the 2016 election. By hurting farmers, Xi hoped Trump would fall out of favor with them. Already, Washington has issued two emergency stimulus packages for farmers who have seen their profits fall off.
“China is going to be buying a tremendous amount of food and agricultural product, and they’re going to start that very soon, almost immediately,” Trump said. “We’re going to give them lists of things we would like them to buy.”
Both sides would prefer to sign a comprehensive trade deal which includes the removal of tariffs. While the meeting between Trump and Xi at the G20 summit did not achieve such a lofty goal, the promise of no new tariffs in the immediate future amid resumed talks should help calm any economic uncertainty.