WASHINGTON – President Donald Trump boasted last Friday that trade talks between the U.S. and China were going well and that a “historic, monumental deal” was near.
By Sunday, he was threatening to slap tariffs on every Chinese product that enters the U.S.
What’s behind his sudden shift in rhetoric?
Some analysts said Trump was seeking to pressure Beijing into signing off on a high-stakes trade deal. Others saw Trump’s tweeted threats as a sign that long-time talks with the Chinese are falling apart.
“It’s a pressure tactic designed to try to get an outcome that you can then live with in terms of your own domestic factors,” said Stapleton Roy, a former U.S. ambassador to China and founding director of the Kissinger Institute on China and the United States.
“I think we are still within reach of an agreement,” Roy said. “I think both sides need an agreement.”
The short-term fate of the talks should be known soon.
A week after difficult negotiations in Beijing, the Chinese government announced Tuesday it would send a trade delegation to Washington to meet with U.S. counterparts on Thursday and Friday. The delegation will include its key player: Liu He, China’s vice premier and lead trade negotiator.
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Treasury Secretary Steve Mnuchin and U.S. Trade Representative Robert Lighthizer told reporters that the Chinese backed off certain commitments last week, and that’s what inspired Trump to make his tariff threat in his Sunday tweet.
Trump, meanwhile, continued to attack Chinese financial practices as financial markets declined over the prospect of a failed trade negotiation and a renewed trade war.
“The United States has been losing, for many years, 600 to 800 Billion Dollars a year on Trade,” Trump tweeted Monday. “With China we lose 500 Billion Dollars. Sorry, we’re not going to be doing that anymore!”
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Erin Ennis of the U.S.-China Business Council said it’s hard to know what’s behind Trump’s tariff threats.
“It seems like the two options are it’s an effort to gain some leverage going into a potential final round of negotiations or it could be a reflection of genuine remaining conflicts that are still to be worked out,” said Ennis, the council’s senior vice president.
“When it comes right down to it,” Ennis said, “no details are actually genuinely known about what the U.S. has asked of China, what China has offered, and whether any of those offers have changed.”
Riley Walters, a policy analyst for Asia’s economy and technology with The Heritage Foundation, said “it’s a little bit difficult to read the tea leaves” when it comes to Trump’s tweet on China tariffs.
But Roy said the Trump administration has been saying it would get an agreement “that no previous administration was able to get” and officials now seem worried they will end up with something well short of that.
“I think they are very worried that they will, on the U.S. side, that they will end up with an agreement where – they have been saying ‘We are going to get something that no previous administration was able to get’ – and they will end up with people saying China is still stealing our intellectual property” and getting away with other illegitimate practices, he said. “I think they are trying to get beyond that and we’ll see whether it works or not,” he said.
Chad P. Bown, a senior fellow at the Peterson Institute for International Economics in Washington, noted that Trump made similar threats to Canada and Mexico right before signing a revamped trade agreement with them. That proposal is currently pending before the Senate.
The China tweets “could be just a threat to try to get a deal,” Bown said. “This is just how he operates.”
Goldman Sachs told its customers much the same thing. In an email, it said that “we think it is more likely that the increase will be narrowly avoided and believe the odds of tariffs increasing on Friday are 40%.”
The pessimistic analysis: New tariffs on China, triggering retaliatory tariffs on U.S. products from China, increasing prices for everybody.
Apparent problems in the trade talks surfaced Sunday via Trump’s Twitter account. The president said that, by Friday, he would increase tariffs on $200 billion worth of Chinese goods from 10% to 25%.
Trump also threatened a 25% tariff on an additional $325 billion of imported goods as he protested the pace of trade talks.
“The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!” Trump said.
If Trump follows through on his threat to place levies on an additional $325 billion in goods, every Chinese product imported into the United States would be subject to a tariff, Ennis said.
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For weeks, Trump and aides had expressed optimism about a new trade agreement between the world’s largest economies. American and Chinese negotiators even discussed a potential summit meeting between Trump and China President Xi Jinping in order to sign a deal.
Now things are very much up in the air, and financial analysts are trying to figure out what it means.
Walters said “this could be the president going into full negotiation mode,” but added that is the “optimistic” view. The other view is that trade hawks in the administration have gotten Trump to “delay things” with China.
The tariffs Trump is talking about would hit Chinese products popular with American consumers, raising the prices ranging from toys to clothes. China would doubtless retaliate with tariffs of their own, with the result being that virtually every product traded between the two would be affected.
In his tweets, Trump argued that the existing tariffs have benefited the U.S. economy. Analysts like Walters took issue with that claim, saying “the U.S. isn’t losing money on trade with China, and studies have shown Americans are paying the full cost of tariffs.”
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Contributing: Deirdre Shesgreen