After yesterday’s move to drop tariff rates on the rest of the world to 10% while raising China to 125%, the world is watching for signs that Trump will cut a deal with Xi.
Can Trump trust any deal he makes with Xi, regardless how good it seems?
Let’s explore the history 🧵:
Back in 2017, one of Trump’s first moves was to invite President Xi to Mar A Lago.
The purpose of holding the meeting at the “winter White House” was to provide an informal setting for their first-ever meeting, allowing them to "break the ice" and build a personal rapport.
The summit in March of 2017 aimed to address significant U.S.-China concerns.
Trump wanted to convey the importance of establishing a "fair, balanced, and reciprocal" economic relationship, expressing concerns about how the trade imbalance affected American workers.
That started a process that led to the phase one deal in January 2020.
Some key steps along the way:
• 7/18 US imposes 25% tariff on $34B
• 9/18 US imposes 10% on $200B
• 1/19 Talks held in Beijing
• 5/19 10% bumped to 25%
• 12/19 Confirm phase one deal
• 1/20 Deal signed
Just five days after signing the deal, on January 20th, China confirmed human to human transition of Covid.
Three days later, Wuhan with a population of 11 million people is locked down.
7 days after that the WHO declared a public health emergency.
The rest is history.
Ultimately China failed in most of the commitments of the phase one deal.
The deal:
• Purchase $200B of US exports over 2017 levels
• Stop intellectual property (IP) theft
• Stop technology transfers
Reality:
• Zero relative increase
• IP theft & tech transfers continued
Of course China would say that Covid interfered with their ability to maintain their commitments.
Trump feels quite differently.
In his estimation, the impact of Covid on his political fortunes, the US economy and the world at large were not beyond China’s control.
It’s not just that China didn’t keep their commitments to Trump under his previously negotiated deal, it’s that they don’t ever follow the rules under any agreement.
WTO rules violations:
• Industrial subsidies aren’t transparent
• IP theft
• Forced technology transfers
• Limited market access
• Non-market economy practices
• General lack of transparency
• Export restrictions
The question that Trump needs to answer for himself, is whether there is any deal with China that he can trust over time.
As I wrote in my article, we are operating inside a 10 year window.
We can’t let China waste our time negotiating a deal that they don’t intend to keep.
In my opinion, Trump has already answered this for himself.
Which is guiding his action in his second term.
This time no invites to his personal residence.
No extended back and forths trying to corral Xi.
Instead he’s put in China in prison while he negotiates with the world.
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