President Trump sent out a tweet late Friday afternoon announcing that he would delay the next round of tariffs against China that had been set to go in effect on March 2nd. He expressed optimism that the trade talks would yield a resolution on the many structural issues at stake, culminating with a summit at Mar-a-Lago between President Xi and himself to conclude an agreement.
In particular, President Trump mentioned “…intellectual property protection, technology transfer, agriculture, services, currency and many other issues.”
With regards to currency, China’s interest align with the Trump administration’s desire to see the Chinese Yuan cease to devalue any further. China’s central bank has been battling for many months to do such that. The Chinese also appear willing to increase their purchase of agricultural goods from the U.S., led by soybeans, a crop whose fortunes have taken a hit since the trade war began.
Where many analysts and trade experts seems to not share the President’s optimism is when it comes to intellectual property protection and forced technology transfers. There hasn’t been any progress mentioned about addressing the U.S. complaint that Chinese authorities and companies pressure U.S. companies to share technology. The U.S. contends the Chinese do so via joint-venture requirements and by regulatory panels that pass along U.S. technology secrets to Chinese firms.
Beijing denies such pressure and argues that foreign firms voluntarily share technology in exchange for access to China’s markets. Furthermore, a consensus on how to judge compliance with any accord reached that includes promises to better police these corporate espionage practices, seems unlikely, as many U.S. trade officials have expressed privately.
This fundamental difference of how each side views this major issue might lead some to believe that a final comprehensive agreement is out of the question. Yet, there is a growing sentiment being reported from within the White House that believe President Trump might sign an agreement that doesn’t fully address the forced technology issue if it significantly slices into the bilateral trade imbalance with China.
The bilateral trade imbalance with China (the ‘trade deficit’), a figure President Trump refers to quite often, is the trade of goods between America and China, which stood at $382 billion last year. It is also a figure that a majority of economists and trade experts say doesn’t adequately reflect who’s gaining or losing in a trade relationship.
The desire to address those technology and enforcement issues may superseded by President Trump’s desire to keep the economy rolling. As he saw in December, fear and uncertainty caused by the trade war can wreak havoc on the stock market, and cast a shadow over the strong U.S. economy he has touted since he took office.
Business owners banking on the tariff threat going away; however, should remain cautious. As we have seen in numerous other issues with this President, his position on these negotiations could swing on a dime. Many businesses are still placing advance purchases on goods that are subject to the next now-delayed tariffs.
As many have them have pointed out, the tariffs were only delayed, not cancelled.