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Trump Shuffle: China Runs Rings Around Trump's Trade Policy by Standing in Place

"Trump can always put tariffs back on," Mnuchin says. Can't China do the same?

The illusion of Trump's alleged trade victories is a sight to behold.

Nonetheless, the market gapped up on Monday as if there was some sort of deal, even though China said there was none.

On Monday we had this meaningless revelation: Treasury Secretary Says U.S., China Have Suspended Tariffs, coupled with an equally meaningless vague threat by U.S. Treasury Secretary Steven Mnuchin that the "President can always put tariffs back on".

Let's Sum Up the Success

  • The US put tariffs on China
  • China retaliated with tariffs
  • Trump took US tariffs off
  • “We’re putting the trade war on hold,” Mr. Mnuchin said on “Fox News Sunday.”

There is no specific timetable for the next steps in the negotiations, Lawrence Kudlow, the director of the National Economic Council, said on Monday.

Loss of Leverage

Excuse me for asking, but precisely what leverage was that?

Will the Truce Will Boost Exports

Yes, it will, compared to the tariff-tariff setup. But to win that deal, both sides had to cancel tariffs.

Tariff cancellation is of course a good thing, but essentially we are back to square one.

"There's a relief for American farmers here because we were headed towards a situation where the Chinese were going to block imports of U.S. goods," said Derek Scissors, resident scholar at the American Enterprise Institute and chief economist at the China Beige Book. However, the latest developments are just "a restoration of the status quo."

Trade Wars are Good and Easy to Win

Please recall ...

China Calls US Bluff

Let's get to the heart of the matter: China Called the US Bluff.

China’s propaganda machine took a victory lap after the talks, proclaiming that a strong challenge from the United States had been turned aside, at least for now. “Whether in Beijing or Washington, in the face of the unreasonable demands of the United States, the Chinese government has always resolutely fought back, never compromised, and did not accept the restrictions set by the other side,” the official Xinhua news service said in a commentary on Sunday.

China’s success partly comes from its ability to stick to a single strategy in trade. Even as Beijing has shown a willingness to talk and make peace offerings in the form of multibillion-dollar import contracts, it has held fast to its refusal to make any commitment for a fixed reduction in its trade gap with the United States. The trade imbalance between the countries has actually widened since Mr. Trump visited Beijing in November and oversaw the signing of import deals on everything from beef to helicopters.

Beijing also has not bent on its Made in China 2025 initiative, an industrial modernization program that Washington and American business groups complain forces foreign companies to share their best technology while potentially creating state-sponsored rivals.

White House trade officials have more expertise with trade law, but China has a small but cohesive team of negotiators who report directly to Liu He, a vice premier and nearly lifelong friend of Xi Jinping, the country’s top leader. Policy decisions that once took a month can now take as little as a day, said a person with a detailed knowledge of the process who insisted on anonymity because of the political sensitivity of the issue.

By contrast, the United States has shifted its demands and struggled to send out a consistent message.

US Consistent Message Playbook

Compare China's trade negotiation strategy to Trump's.

This set of events ending in a feud is fitting for a Saturday Night Live skit.

The feud culminated with an agreement to agree at some unknown point in time about matters unknown.

"There is no specific timetable for the next steps," said Kudlow.

Time to Celebrate

So here we are. Both sides canceled tariffs. The US won nothing more than vague commitments.

Yet, compared with a disastrous trade war, this set of events was a huge success. It was the best we could hope for.

Let's celebrate!

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Mike "Mish" Shedlock

I'm certain that if y'all keep voting, it'll all work out eventually.

Mish as always, very insightful article. It is real eye opener.

Progress? Nothing has happened much. We got 3 people back, and kudos for that, but the norks already have a stockpile of nukes and were going to stop testing because the mountain is already falling apart. They’re never giving up their nukes. And now they get to bargain at the table. That’s a loss. But really, how else was it ever going to play out. Same with Iran. They’ll get nukes and we’ll have to bargain. Then every other third world country will see the importance of nukes and get them as well.

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