Whether China is a willing or unwitting pawn in President Trump’s 2020 reelection strategy, the timing of any Trump administration trade tariff deal with China will be viewed through the prism of the upcoming 2020 U.S. election.
U.S.-China trade talks have been an up-and-down issue for quite some time now – with a tit-for-tat approach to tariffs that rattle global markets. How this issue is resolved will help shape future U.S.-China relationships.
Clearly President Trump knows the power of his utterances and the effect they have. He toys with the stock market using impromptu press conferences and alternately dropping tweets about China and a trade deal.
As pointed out in this New York Times story, Trump is not only reading the markets as a daily measure of his success, he is also shaping policy that keeps U.S. stock prices high. Trump has shown a unique obsession with the financial markets, tweeting that high stock prices prove he is making America great again.
When the markets drop Mr. Trump attempts to shift the blame to someone or something outside his control. As an example, when the markets turned downward, Mr. Trump softened his hard line on Chinese trade practices, trying to quiet market fears that his tariff threats against China only exacerbate.
Noted economist Paul Krugman captures the Trump game well when he writes, “I’ve lost count of how many times markets have rallied in the belief that Trump was winding down his trade war, only to face announcements that a much-anticipated deal wasn’t happening or that tariffs were being slapped on a new set of products or countries.”
The stock market has performed like a schoolyard see-saw as the President raises and lowers the expectation that a trade deal with China may be near.
The President has most recently teased the global economy, saying perhaps he would wait until after the 2020 election to strike a deal with China. This spooked the market again as global traders digested the president’s view that the uncertainty surrounding the US-China trade talks – which have been blamed for cutting global trade growth by as much as three-quarters since 2017 – could drag on into 2021.
While the President boasts that “China is paying for the trade war”, in reality American consumers, farmers, manufacturers, and taxpayers are footing the tab. To date, Moody’s estimates that the Trump trade war with China has cost 300,000 U.S. jobs. Should U.S. tariffs stay in place at current and intended levels, some 450,000 fewer jobs may be created by year’s-end — a figure that might rise to 900,000 if the trade dispute carries on through next year.
Jim Cramer, the host of CNBC’s Mad Money economic show urged President Donald Trump to go forth with the next round of tariffs set for Dec. 15th after the November U.S. jobs report showed the U.S. economy is stronger than some may have believed. “If we're experiencing this kind of growth without inflation, that means President Trump has a ton of flexibility when it comes to the trade negotiations with China," Cramer said. He seems to imply that it is time to ‘stick it to China.’
Politics as Usual
Clearly, the China bogeyman will be front and center in the 2020 presidential election as Democrats and Republicans may each claim the other has “shipped good-paying American jobs to China.” We can expect to see Susan Houseman, vice president and director of research at the W.E. Upjohn Institute for Employment Research, point out that global trade, especially with China has destroyed 5 million manufacturing jobs in the US.
In the inner sanctum of Trump campaign headquarters, certainly his strategists in the White House are calculating how “yuge” the stock market pop will be and when to spring a tariff trade war agreement with China to help provide an election year bounce.
Former White House economic advisor and ex-Goldman Sachs executive Gary Cohn has stated that Trump was desperate for a win, adding, "The only big open issue right now that he could claim as a big win that he'd hope would have a big impact on the stock market would be a Chinese resolution.”
The President created the China tariff trade war and he can end it at his discretion on his own timetable to declare victory, regardless of whether or not it produces any meaningful economic results for the American people.
Black Cat - White Cat
Will China be used as a tool to influence the U.S. elections?
All of this is playing out amidst the ongoing Trump–Ukraine scandal as a backdrop. For those not paying attention to this scandal, it revolves around the efforts by President Trump and his team with their seemingly endless desires and efforts to coerce Ukraine into providing damaging narratives about his political opponent, former Vice President Joe Biden, while seeking Information related to Russian and or Ukrainian interference into the 2016 Presidential election. The scandal has sucked all the oxygen out of the American spirit and lead to impeachment hearings on Capitol Hill.
Others argue, as does Wang Xiangwei, former South China Morning Post editor-in-chief, “Trump may not want a deal on trade at all, as he wants to play the China card to energize and solidify his electoral base in the run-up to his presidential re-election campaign in 2020 … Trump is increasingly seen in China as a bogeyman who uses trade as weapon to undermine the country’s authoritarian regime and contain its rise.”
As former Speaker of the House, Tip O’Neil famously remarked, “All politics are local.” Being seen as tough on China has been known to be a sure vote getter in American politics.
It is obvious from the Biden affair that he will use any issue – legitimate or not – to fuel his re-election campaign in 2020. So, here’s a question: Will he play the China trade issue and the global economy as inconsequential pawns in his desire to help fuel his re-election? Conversely, will China use the coming election as a diversion to strike a favorable deal for themselves?
Both sides have agreed to pursue a “phase-one” deal that knocks out some demands before pivoting to a more comprehensive deal.
I fear the “phase one” deal will be more transactional than transformative. If this is true, will American farmers, consumers, manufacturers, and taxpayer pay the ultimate price?
By transactional, I mean that China capitulates to buying more U.S. agricultural goods (which the Chinese need and want) without addressing objectionable trade practices: massive subsidization of Chinese industries, limiting Chinese markets to foreign investment, and continued theft and forced transfer of intellectual property from U.S. companies.
China and the U.S. relationship, while strained, remains the most important bilateral relationship in the world today.
The Trump Tariff Trade War is like that ancient geopolitical game of ‘Go’ played out on the world stage. For the uninitiated, ‘Go’ is an abstract strategy board game for two players, in which the aim is to surround more territory than the opponent. The game was invented in China more than 2,500 years ago.
In a recent article published in Foreign Affairs, Fareed Zakaria, host of CNN’s Fareed Zakaria GPS and author of The Post-American World, opines what is at stake in this game: “The United States risks squandering the hard-won gains from four decades of engagement with China, encouraging Beijing to adopt confrontational policies of its own, and leading the world’s two largest economies into a treacherous conflict of unknown scale and scope that will inevitably cause decades of instability and insecurity.”
It is BOTH countries – each seeking short and long-term strategic advantage – dancing around the Trump tit-for-tat trade war – that risk becoming entwined in America’s 2020 U.S. domestic election politics.