A strange kind of truce 

The US and China have signed an agreement aimed at easing a trade war that has caused concern throughout Asia, with both sides presenting the compromise as a success. But as Sun Xi reports from Singapore, nothing substantive has yet been done to address the problems that caused the conflict in the first place

When President Trump unilaterally imposed tariffs on China in the spring of 2018, the Prime Minister of Singapore expressed dismay.Lee Hsien Loong told the Washington Post that ‘nobody wants a trade war’, yet he acknowledged that trade friction between China and the United States had been brewing for some time.

The Singaporean government is a major investor in both China and the United States. Premier Lee warned that a trade war between the two countries would have a negative impact on both Singapore and the rest of Asia.

He called on the respective governments to resolve their dispute through the World Trade Organisation. While they have not done so, they have nevertheless reached what is being termed a ‘truce’ after almost two years.

Cold war fears

When Donald Trump targeted what he said were China’s unfair trade practices in 2018, optimists hoped that a full on trade war could be avoided and that the two countries would reach a deal quickly. However, pessimists warned of a new cold war, spreading beyond trade into other areas of conflict. Neither side has been proven totally right.

Over the past two years, the US and China have held several rounds of tough trade negotiations. In December 2019, a preliminary deal was announced.

Then, in January 2020, the long-expected phase one deal was signed at the White House by President Trump and Chinese Vice Premier Liu He.

Compromise

The document reflected a compromise. On China’s side, Beijing has agreed to increase purchases of US manufacturing, energy and agricultural goods and services by at least US$200 billion over two years. China has also said it will enhance protection for intellectual property.

Yet to save face, Chinese officials emphasised that the compromises were in line with Chinese consumers’ growing appetite for US products. They say the deal is a win for China because it fits with the nation’s plan for reform and opening up. China thus insists it has not surrendered to US pressure and that the deal reflects its own goals and interests.

On the US side, the compromise involved reducing both existing and planned tariffs on Chinese products. However, the biggest concession Washington has made is to postpone debate on the thorniest topics to the next phase of negotiations.

Unresolved issues

Donald Trump has long accused China of unfair trading practices and intellectual property theft. Neither of those issues has yet been adequately addressed.

In the deal, both nations have agreed to abide by the International Monetary Fund’s principles on avoiding the manipulation of exchange rates. Just before the signing, the Trump administration revoked its decision to label China a currency manipulator.

Some people say that the phase one deal is a real victory forneither China nor the US. However, it is much better than no deal. The outcome was clearly welcomed by the business community and the Dow Jones index in the United States soared to a record high.

Political perspective

China’s President Xi Jinping called the deal ‘good for China, for the US and for the whole world’, while President Trump called it ‘a momentous step, one that has never been taken before with China, towards a future of fair and reciprocal trade’.

The two nations needed the deal urgently because 2020 is an important year for both.

For the US, the next presidential election will be held this November. As Mr Trump seeks a second term, he has presented the deal with China as a political success.

President Xi Jinping called the deal ‘good for China, for the US and for the whole world’
President Xi Jinping called the deal ‘good for China, for the US and for the whole world’

For China, this year will mark the achievement of its first centenary goal of ‘building a moderately well-off society in an all-round way’ and of ‘eliminating absolute poverty in China’. The compromise with the US can thus be presented as an achievement in terms of China’s international relations with its most serious international rival.

Trump visit

President Trump will travel to China this year to start talks on the second phase of the agreement. The date of the trip is undecided but will fall before the coming presidential election. That is to be welcomed, as dialogue is always better than confrontation.

Pessimists warned of a new cold war

During his China trip, Mr Trump will talk directly with President Xi. He is likely to express significant concerns relating to China’s industrial policy and subsidies of state-owned enterprises.Mr Trump may even try to urge China to change its so-called ‘state capitalism’ economic model, although from an ideological perspective, Communist China has no interest in systemic change.

Popular leader

Perhaps surprisingly, there are a significant number of people in China who would like to see Mr Trump re-elected in the autumn. They regard him as a ‘strategic gift’ for China in the long run because his actions encourage the process of reform. After three decades of rapid change, China’s progress is being held back by vested interest groups. Advocates of more reform believe the trade war could be viewed as a catalyst from outside, similar in impact to China’s accession to the WTO in 2001. They hope pressure from Trump will encourage China to address pressing domestic issues.

Confucian wisdom

China’s most famous teacher and philosopher Confucius once said: ‘It is always a pleasure to greet a friend from afar.’ Therefore, I expect that Trump’s second official visit to China will be very well received.

As Deng Xiaoping, the chief architect of modern China, predicted, ‘the China-US relationship can never be too good or too bad’. Even without the trade war, there will be other conflicts between the two ideologically different nations, such as recent struggles over Huawei, Hong Kong, and Xinjiang issues.

Although a partial truce has been temporarily reached, Beijingviews its rivalry with the United States as an ongoing issue. China is prepared for more challenges ahead but its leaders still hold firm to their long term objectives: the realisation of the ‘Chinese Dream’ and the ‘great renaissance of the Chinese nation’.


Sun Xi is an independent commentary writer based in Singapore, and worked for the Ministry of Commerce of the People’s Republic of China from 2005 to 2008

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