In the January 2020 US-China trade deal, led by the Trump administration, China agreed to buy an additional $200 billion in US-made goods and services, using 2017 as the base year, by the end of 2021.
By agreeing to this, China was committing to buying a record amount from the United States. At the time, Trump and his supporters touted the deal as a major breakthrough in Chinese trade. Welcoming the deal, Trump called Chinese President Xi Jinping a “very, very, good friend.” Having followed China’s international diplomatic and trade policy for 30 years, I was skeptical at the time about its adherence to the agreed terms. Two years later, my skepticism is confirmed.
The end of 2021 has come and gone, and according to Chad Brown, senior fellow at the Peterson Institute for International Economics, China hasn’t even come close to committing. To meet the goal of an additional $200 billion, U.S. purchases by China would have required $227.9 billion in 2020 and $274.5 billion in 2021, for a total of $502.4 billion during of the past two years. Publishing his analysis of the trade data, Brown noted that China only reached 57% ($288.8 billion) of that total.
China could point the finger at the pandemic and argue that the global economy collapsed in 2020 as industries were shut down and jobs were lost or mothballed. However, 2021 has shown a strong recovery from the first year of the pandemic. Sectors such as automotive, agriculture and consumer products have grown to the point that supply chains have been disrupted and long waiting lists for a variety of items have grown. Yes, a pandemic and subsequent economic recession happened. However, if there is one country in the world that has enough cash reserves to make record purchases, it is China.
China’s lack of buy-in to the trade deal repudiates one of the Trump administration’s strongest foreign policy moves. However, did anyone really think China would keep its word on the deal? I got the feeling that China was just placating Trump thinking he would leave soon and the deal would be forgotten in the United States, whose citizens seem to have a short memory on issues such as trade. China is very good at using the weather to its advantage.
It is a country that intimidates countries around the world, and if they complain, they punish them through economic means. It is a country that abuses its own minorities such as the Uyghurs and lies to the world press about its actions. This is a country that has used prison and child labor to manufacture products that it subsidizes to enter global markets. It is a country that uses its powerful economic weight as a weapon.
So, are we really surprised that China is not honoring its agreement with the United States?
What is the solution to dealing with China and its reluctance to manage its bloated trade surplus with the United States? Should the United States raise tariffs on the remaining Chinese imports that have not been hit with tariffs? Should goods that were subject to high tariffs be subject to even higher tariffs? These measures would exacerbate the existing inflation problem in the short to medium term. Poorer Americans who are forced to shop at discount stores such as Family Dollar would suffer the most because many products on sale come from China. And does anyone believe that China would retaliate if higher tariffs were imposed?
Our government must not remain silent on the fact that China is not keeping its trade promises. Too many American entities and individuals have self-censored after criticizing China. Remember Houston Rockets general manager Daryl Morey tweeting his support for Hong Kong protesters fighting against Chinese oppression? He quickly took down his tweet, likely because the NBA views China as a lucrative market. This is the problem – money seems to be more important than opposing what is right with China. If China fails to live up to its obligations to the United States, then the rest of the world must know in uncertain terms that making deals with that country may amount to little or nothing. The United States must also maintain diplomatic pressure on China to step up its purchases.
We need to be serious about producing products in North America so that we are not as vulnerable to China as a supplier of consumer and industrial goods. China is not an ally of the United States and has enriched itself by producing and selling products to the American public. I say North America because we need to maximize our trade relations with Canada and Mexico, which are allies. So many products made in these countries contain American components or materials. The long-term strategy of producing more with our allies will allow the United States to be less dependent on China, which will give it less leverage on trade-related issues, and that is what this country fears most. .
Jerry Pacheco is the executive director of the International Business Accelerator, a nonprofit business counseling program of the New Mexico Small Business Development Centers Network. He can be reached at 575-589-2200 or [email protected]