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“Phase One” of the resolution of the United States-China trade war was signed earlier this week, and it had some pretty big wins for the Trump administration.
Writ large in media headlines were two things the United States did well to get Beijing to sign onto — agreements from China to crack down on intellectual property theft and to increase imports from the United States by $200 billion over 2 years.
Whether or not Chinese President Xi Jinping’s government actually enforces any of this is another question entirely, but that’s why it’s called “Phase One.”
President Donald Trump insisted, according to CNBC, that the agreement had “total and full enforceability.”
During the signing, he said the two countries were “righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers and families.”
Most of the tariffs from the trade war will remain in place, according to Reason, and the deal is still a rough sketch.
Still, the fact that China was even willing to agree to any of this in the first place was, at the very least, a major win for the United States — particularly since we were told how the trade war with China was going to end in tears.
As it turns out, if there are any tears being shed, they’re likely coming from Beijing.
On the same week that the “Phase One” agreement was signed, China revealed its economic growth in 2019 was the lowest it’s been in 29 years — 6.1 percent, according to Reuters.
While that growth was by no means slow by global standards, it was a major cooling-off from the 6.6 percent growth China experienced in 2018.
Furthermore, experts predicted the world’s second-largest economy would further cool to 5.9 percent growth in 2020.
The sluggish growth was, according to Reuters, recorded “amid a bruising trade war with the United States, and more stimulus is expected this year as Beijing tries to boost sluggish investment and demand.”
“We expect China’s growth rate will come further down to below 6% percent in 2020,” Masaaki Kanno, chief economist at Sony Financial Holdings in Japan, told Reuters.
“The Chinese economy is unlikely to fall abruptly because of … government policies, but at the same time the trend of a further slowdown of the economy will remain unchanged.”
Reuters reported that “[e]asing trade tensions have made manufacturers more optimistic about the business outlook, analysts said, though many of the tit-for-tat tariffs both sides imposed during the trade war remain in place.”
While U.S. GDP growth isn’t exactly as robust as China’s — we’re a far more mature economy, which means we don’t put up rocket-ship numbers the same way that Beijing does — our third-quarter gross domestic product growth was actually higher than expected.
“The Commerce Department said Wednesday that economic activity grew at an annualized rate of 1.9% in the third quarter, down slightly from the 2% pace in the second quarter. Economists polled by Dow Jones had expected the first look at third-quarter economic growth to come in at 1.6%,” CNBC reported in October.
As the White House pointed out, too, the third-quarter results made this the longest run of economic expansion in recorded U.S. history.
“As today’s advance Gross Domestic Product (GDP) release confirms, economic growth continued in the third quarter of 2019, beating market expectations and adding to the expansion’s record length. The release also confirms that the Trump Administration’s policies support sustained economic growth and lead to higher incomes for American families,” the White House said in a statement upon the release of the numbers.
“In its final projection before the 2016 election, the Congressional Budget Office (CBO) estimated that real GDP would grow at a 2.1 percent annual rate in the first 11 quarters of a new Administration. Instead, under President Trump, real GDP as of the third quarter has grown at a strong 2.6 percent annual rate since the election. As of the third quarter, real GDP is $230 billion — or 1.2 percent — higher than CBO’s projection.
“Furthermore, under President Obama’s expansion period, real GDP grew at only a 2.2 percent annual rate compared to the Trump Administration’s 2.6 percent rate.”
Now, protectionism for protectionism’s sake and modern-day mercantilism are things any sensible conservative should be against, which is why an all-out economic war over mere trade deficits is something the United States would do well to avoid.
This being said, using tariffs as a means to an end — particularly when it comes to China, which has been a bad actor on the economic stage for decades and has made little effort to change — is a very necessary evil.
Beijing has long promised that it will open up its economy and protect intellectual property. It hasn’t.
Whether or not “Phase One” makes any difference remains to be seen, but it’s a promising first step,
What we do know is that the trade war has hurt China. And, from the looks of things, it’s hurt them more than it’s hurt us.
Furthermore, it’s changed the “calculus” of the matter, according to George Mason University economist Tyler Cowen.
“The U.S. has established its seriousness as a counterweight to China, something lacking since it largely overlooked China’s various territorial encroachments in the 2010s,” he wrote in an Op-Ed for Bloomberg on Wednesday.
“Whether in economics or foreign policy, China now can expect the U.S. to push back — a very different calculus. At a time when there is tension in North Korea, Hong Kong, Taiwan and the South China Sea, that is potentially a significant gain.
“President Donald Trump’s tariffs did hurt U.S. consumers, and while that is indeed an economic cost of the deal, it is also a credibility benefit,” he continued.
“It shows that the U.S. is in fact willing to incur some pain to oppose China, contrary to the common Chinese view that Americans are ‘soft.’ U.S. credibility has also been improved among its allies and some neutral nations.”
Trump’s tariffs, in the end, haven’t been deadly for us and they’ve forced Beijing to the table.
That’s a major change from where we were a few short years ago — and it’s one for the better.