US president Donald Trump has postponed the introduction of higher tariffs on Chinese goods until October 15, in a rare “goodwill” gesture as the two economic powers gear up for another round of high-stakes trade negotiations. Interestingly the ongoing trade dispute between the US and China could tip over into a full-blown economic war — and that spreads to Chinese students and scientists being thrown out of America and American business executives out of China and that spreads to all the investments we’ve made in each other’s countries being ripped out — the world as we’ve known it for the last four decades is going to be replaced with something much uglier, less prosperous, less stable and less able to meet global challenges, like climate change and cybercrime, that are barrelling down on us. This has become a really bad play.
US and China need a ceasefire now — and if no one else is going to propose the terms, I will.
President Donald Trump should say to President Xi Jinping: “For the next six months, we’ll suspend all the tariffs that we’ve imposed. And in those six months we expect you to order from the top down an end to your trade abuses: stealing intellectual property, forcing technology transfers, restricting access, etc.” That’s not a perfect outcome after two years of negotiations, but perfect is not on the menu. Only “better” is on the menu right now.
Don’t get me wrong, Trump was right to insist that the US-China trading relationship had to change. But Trump vastly underestimated in several ways how “easy” winning a trade war with China would be.
It takes about 22 hours on Amtrak to go by train from New York to Chicago. Beijing to Shanghai is about the same distance, and it takes China’s bullet train 4.5 hours to make that trip. That’s not a typo. And it partly explains why a lot of Chinese officials look at America today as a dysfunctional mess that can’t build anything big and hard anymore because it can’t act together.
Shortage of trust
Also, while I respect the comprehensive approach Trump’s actual trade negotiators took in these talks — they wanted China to enact laws and regulations that would outlaw stealing of intellectual property, forced technology transfers, certain government subsidies, and to create a US-China mechanism to verify compliance — it might have been too much change all at once for the Chinese system. That’s not an excuse for Beijing. It’s just a fact.
What Trump also underestimated is that US doesn’t just have a trade access problem with China today, it also has a trust shortage problem. When all we bought from China were toys and T-shirts and cheap electronics, we did not care if they were communists, capitalists, authoritarians or vegetarians. But now that China wants to sell us many of the same high-tech products that America and Europe make — from 5G infrastructure to cell phones to advanced electronics — products that get deeply embedded in our society and can be dual use (civilian and military), we need a whole new level of trust between our societies. That will take time to build.
Xi, for his part, completely misread how much Republicans, Democrats and the broad US business community are behind Trump’s unwillingness to tolerate China’s trade abuses any longer — not when China wants to make and export all the same products that we do. If China thinks Americans will continue to tolerate the status quo, they are mistaken. So for all these reasons it’s best to go right now for a truce and a period of confidence-building.
While those six months play out, Trump should sign the Trans-Pacific Partnership deal — which brings the 12 biggest Pacific economies, except China, into a global Pacific trade pact built around American values and standards — and then line up all our European Union allies as well.
That way when we revisit this issue in six months, we can present China with a united front to formalise its trade openings. By then it won’t be Trump versus Xi, but the best reciprocal rules for trade for all. That should be our goal. If Trump and Xi can forge a big deal right now, God bless them. I’ll tip my cap. But everything I see today tells me that we should just focus on making some real trade progress now, lowering the temperature so we can have a more rational, long-term discussion about rules and avoiding a new Cold War with China that will destabilise the whole globalisation system — a system that’s also not perfect but, boy, you will miss it if it’s gone.
— Thomas L. Friedman is a Pulitzer prize-winning journalist and author.