Trade Negotiations Require a Steel Spine
President Donald Trump dealt himself a strong hand before negotiating with China.
He held three aces. He’d placed tariffs on imported aluminum and steel in response to unrelenting Chinese overproduction. He’d threatened tariffs on $150 billion in Chinese imports in retaliation for theft and forced transfer of American intellectual property. And for trade violations, he’d forbidden U.S. companies to sell parts to Chinese cell phone giant ZTE, forcing it out of business.
And then, inexplicably, his lead negotiator, Treasury Secretary Steven Mnuchin, quickly folded in talks in Washington, D.C., last week. He left two days of negotiations with top Chinese officials with what amounts of an unenforceable letter of intent. The “joint statement” says the Chinese will buy some more American made stuff, improve its protections for American intellectual property and patents, and remove some barriers preventing U.S. companies from operating in China. But there’s no specifics and no enforcement.
In exchange for vague promises, Mnuchin suspended the tariffs. In addition, on Tuesday, the Wall Street Journal reported that the United States and China had reached a tentative deal to save ZTE, despite the fact that ZTE failed to honor an earlier agreement made after it violated trade embargos against Iran and North Korea.
Now China holds all the aces. It is bragging that it trounced the United States in trade talks. The stock market shot up 350 points Monday on Mnuchin’s assertion that he’d stopped a trade war between China and the United States. And maybe certainty for investors was all Mnuchin, a former Wall Street banker, wanted. But steel stocks slumped Monday. And that’s not what President Trump promised on the campaign trail. It’s not what tough negotiators would have achieved for the United States when it had the upper hand. No potent negotiator would have surrendered that hand for vague promises, especially considering China’s long history of disregarding its trade pledges.
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