Former President Donald Trump has already set his own negotiating demands. The first real talks between his administration and China are scheduled for this weekend in Geneva. China exports to the U.S. are down an astonishing 46%. This steep drop-off has caused both countries to reconsider their trade partnerships.
Trump’s recent Oval Office proclamations trumpeted a tremendous trade turnaround. The drop in shipments is an indication that the US is now losing the trade war – suffering losses from China’s exports, he added. He touted that China shipments had dropped off a cliff – down 60% – a trend that he likes. To Trump, “80% Tariff on China [is] the right number!” This amounts to a historic increase over previous tariff rates. What this clearly represents is his very hard line on getting tougher economic retribution for Chinese imports.
Ryan Petersen, the widely followed CEO of Flexport, kinda sorta confirmed that exports from China to the U.S. crated by over 21% last month. This dramatic decrease adds to the months-long trend of falling trade volumes. As economists have recently noted here and here, a 50 percent reduction in shipments might be a major tipping point. This new regulation should assist both countries in reestablishing more regular commercial trade. Trump’s approach would largely still lead the U.S. to endure both price increases and shortages. This would still be the case even if we canceled all tariffs immediately this weekend.
The former president’s big idea The former president emphasized the power of breaking down barriers and opening markets. He stated, “CHINA SHOULD OPEN UP ITS MARKET TO USA — WOULD BE SO GOOD FOR THEM!!! CLOSED MARKETS DON’T WORK ANYMORE!!!” This comment is indicative of his more than 30 years belief in the need for mutual market access in trade relations.
As negotiations approach, U.S. and Chinese negotiators will zero in on the dramatic fall-off in trade volumes. As important, they’ll examine how this decline will affect their long-term economic ties. What happens in these negotiations may well determine whether we end up with a face-saving compromise or move towards a new normal in U.S.-China trade policy.