22.01.2020 Author: Salman Rafi Sheikh

Is Trump Covering Up his Defeat through the China-US Trade Deal?


On January 15, the US president signed a ‘historic’ trade deal with China in the White House. Strangely enough, the deal was signed by the US president himself despite the fact that his Chinese counterpart was not there. From the Chinese side, China’s Vice premier, a foreign dignitary far below in protocol, signed the deal. Why did Trump want to sign the deal himself? One important reason for this is his bid to project himself as a ‘deal maker’—a projection that he intends to use in his re-election bid. Trump’s own presence also shows that the deal was important for him not only economically, but also politically at a time when he is facing impeachment, although chance of its success are minimum. While Trump boasted this deal off as a US victory, a close reading shows that this is far from the case.

If anything, the fact that Trump had made a deal shows that the underlying objective of trade-war China i.e., crushing the Chinese economy, has not been achieved. On the other hand, loses caused by this trade-war to the US economy could have damaged Trump’s political reputation irreparably if he had continued to wage it. As a matter of fact, what Trump calls a “US victory” is only an agreement that lets China buy US products—things that it has always wanted to buy and was already buying before Trump began the war. Ironically enough, China’s purchases are going to be as much only as they were in 2017, including $52.4 billion of energy exports, $32 billion of agricultural commodities, $77.7 billion of manufactured goods and $37.9 billion of services.

Secondly, why this cannot be an American victory is the fact China has made commitment only for the next two years. What happens after two years is unclear in as much as no practical arrangements for a long-term implementation of the ‘deal’ have been spelt out. And, while the ‘deal’ allows China to buy US products, the Chinese premier made it clear that China will buy goods “based on the market demand in China,” suggesting Beijing may not view the targets as so ironclad. One reason, perhaps, for this is China’s contracts with other countries.

And, while US states where agricultural produce is high did vote for Trump in the 2016 elections, Trump’s ‘triumphant deal’ seeks mainly to make amends to the farmers, a US economy sector most hit by Chinese retaliations. After China’s decision to stop buying US agricultural products, American Farm Bureau Federation President Zippy Duvall was reported to have said that this decision “is a body blow to thousands of farmers and ranchers who are already struggling to get by.” This did work for China, but not for president Trump both politically and economically.

According to a report of US Farm Bureau, farm bankruptcies are on the rise in the US since 2018. Farm bankruptcies are up 24% from the prior year and the highest level since 676 filings in 2011, becoming a big reason for the US president to worry that might bit him hard in the elections if the Chinese continue to stay away from the US products, and hide behind the ‘demand any supply’ caveat.

That the deal was meant to cover up loses in the agriculture department and that it has clear political underpinnings for Trump is evident from the way the states that voted for Trump in 2016 are also the states where farm bankruptcy is the highest. Consider this: farm bankruptcies are highest in Wisconsin, Georgia, Nebraska. And, all of these states had voted for Trump in 206 elections. In Wisconsin, Trump had won 47.8 per cent of votes. In Georgia, Trump had won 51 per cent of votes. In Nebraska, Trump had won 59.9 per cent of votes, and in Kansas, Trump had won 57 per cent of votes. In 2018-19, there were 48 bankruptcies in Wisconsin; 37 in Georgia, Nebraska and Kansas.

All of these states experienced bankruptcy filings at or above 10-year highs, undoubtedly depicting a grim result of Trump’s ‘trade war’ with China, and how that ‘trade-war’ has directly hit Trump’s own vote bank. It was clearly a misconceived war that Trump had waged, and had to blink first now in order to save his voters; hence, the explanation: Trump has not been able to beat China economically. On the contrary, Chinese retaliation was powerful enough to shake Trump’s political foundations from its core.

While Trump had tried to assuage the fears of the farmers through $28 billion in aid for farmers affected by the tariffs, this led to yet another politically and economically counter-productive situation whereby 40% of farm profits this year are expected to come from federal assistance, signalling how critical the situation had become for Trump before he decided to sign the deal.

It also clearly explains why Trump wanted to sign the deal himself. The intention, in simple and plain words, was to speak to his farmer voters and show them how ‘mindful’ of their problems he really is, and that only he could have done such a deal (although it is hard to forget that only he could have caused the damage in the first place).

Nonetheless, Trump’s projection of the deal as a “US Victory” signals how he intends to use it. In his election campaign, he is most certainly going to sell his ‘tough stance’ on China, and how it has ‘paid off’ in terms of ensuring a consistent Chinese purchase of US agricultural products. Of course, a necessary nuisance that Trump will have to counter will be Chinese refusal to buy these products because of ‘lack of demand.’

As such, while the deal might have paid off in terms of a cease-fire, it might not pay off on the elections day.

Salman Rafi Sheikh, research-analyst of International Relations and Pakistan’s foreign and domestic affairs, exclusively for the online magazine “New Eastern Outlook”.

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