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The phase-one pact, which took effect in mid-February, is falling short on a number of fronts, including Beijing’s promises of large agriculture and energy purchases. But the Trump administration so far has been hesitant to ramp up the pressure or back away from the deal altogether, even as the rhetoric on both sides heats up.
As the U.S. economy craters, the death toll from Covid-19 passes 67,000 and some 30 million Americans join the ranks of the unemployed, Trump now finds himself boxed in. Respond too forcefully amid a growing public outcry to punish China — with his favorite economic weapon of tariffs or other means — and he risks hurting consumers and businesses already facing the deepest recession since the 1930s.
“The trade war was launched in good economic times, when additional tariffs could be absorbed,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies. “Reimposing or expanding tariffs right now, in the midst of a global pandemic and U.S. unemployment at over 20%, would be far harder to justify economically or defend politically.”
Read More: Trump Seeks to Pin Virus Blame on China Yet Reprisal Uncertain
Biden Ad
Campaign advisers to former Vice President Joe Biden, the presumptive Democratic nominee, are trying to exploit what they see as a glaring weakness in Trump’s approach.
“China at the moment has all the leverage,” said Jake Sullivan, former Biden national security aide who advises his campaign.
In a recent TV ad, the Biden campaign said “Trump rolled over for the Chinese” because “he took their word for it” when President Xi Jinping told him earlier this year that the virus was contained. Biden advisers argue that the economic and health catastrophe could have been averted or contained if the president had been tougher on China earlier this year instead of praising the trade deal.
“The timing of the deal could not have been worse from a public health perspective because it was precisely during this period in January and February when what we most needed was a demand for transparency, a demand of cooperation, a demand for answers from the Chinese,” said Ned Price, a former National Security Council official in the Obama administration.
Trump’s Approach
Trump said Sunday night, in a televised town hall from the Lincoln Memorial in Washington, that he was tougher on China than past administrations and achieved an “incredible” trade deal.
“China ripped off our country and I’ve told this to President Xi directly, in a nice manner and in a not-so-nice manner,” Trump said in the interview on Fox (NASDAQ:FOX) News. “President Obama and Joe Biden didn’t do anything. China just had a field day with our country.”
The political pressure to do something, however, is mounting within his own party. While Trump denied reports last week that his administration is planning to cancel part of the U.S.’s debt obligations to China, he said he had many other ways to punish the country.
On Sunday, he called tariffs the “greatest negotiating tool” but didn’t directly answer a question on whether he’d use it now against China for the country’s failure to limit the spread of the virus.
Over the past two years, Trump imposed duties on roughly $360 billion in Chinese goods, and China retaliated by hitting more than half of America’s exports. The agreement signed Jan. 15 served as a cease fire in the trade war, and it was supposed to usher in a new era of commercial partnership.
“A cooperative economic and trade relationship is the propeller of the overall China-U.S. relations,” Vice Premier (NASDAQ:PINC) Liu He said at the White House signing ceremony.
Take Action
But the warmth is fading rapidly as the countries feud over who’s to blame for a U.S. public-health crisis and an economy in a steep decline. With the Republican caucus calling for China to pay a price, Trump could be convinced to take action before the election.
“Trump will be both emboldened and compelled to take strong action against the Chinese as he realizes American voters, and in particular his political base, want accountability,” said Jason Miller, a senior adviser to Trump’s 2016 campaign.
Whichever route the president takes, continuing to praise what he lauded as “the biggest deal anybody has ever seen” could backfire.
Two-thirds of Americans have a negative opinion of the country where the virus originated, a recent poll from the Pew Research Center found. That’s the most since Pew began asking the question in 2003. Seventy-two percent of Republicans say they see China unfavorably compared with 62% of Democrats.
Trump’s messaging on China’s handling of the virus, which first emerged in the city of Wuhan in December, has recently become more aggressive though he’s been careful to distinguish his displeasure with the country from harsh comments about President Xi.
Critics of the deal said its terms, especially the promises on purchases, were unrealistic from the get-go. That’s only been exacerbated by the slump in demand caused by the virus outbreak.
China committed to spend $52.4 billion buying U.S. energy over two years. The American Exploration and Production Council said last month that China had purchased “a de minimis amount of U.S. crude in the first months of 2020, while it has increased purchases of crude oil from Saudi Arabia and Russia.”
Bloomberg Economics: Remember the Trade Deal? China’s Not Buying
A senior USTR official, on a call with reporters last week, acknowledged that there have been hiccups related to purchases and that the Trump administration has been talking to China to make sure the country stays on track with its commitments. A required action plan on changes to China’s intellectual-property rights regime was published later than expected, and some U.S. officials view it as falling short on specifics.
Battleground States
The Trump campaign has long said Biden has a track record of being too soft on China. A recent TV ad by Trump’s Super PAC America First Action labeled him “Beijing Biden.”
The big question this fall is whose anti-China message resonates more with voters, especially in battleground states like Wisconsin.
Trump might have an edge because he has the power to act, said Nick Everhart, a Republican strategist in Ohio. “Unlike Biden, Trump can start doing things in real time to be aggressive,” he said. “Politically, he is in position to dictate the terms of engagement.”
Trump in 2016 narrowly defeated Hillary Clinton in Wisconsin by just under 23,000 votes, and with agriculture being an important part of the state’s economy, Democrats are hoping to seize on what they see as his failed trade policies that have exposed farmers to retaliation and resulted in more than $20 billion in subsidies for the sector.
With six months to go until election day, Real Clear Politics’s polling average shows Biden leading Trump by about five points in national surveys. Biden also holds narrow leads in battleground states: He’s three points ahead of Trump in Wisconsin, five points ahead in Michigan and six points ahead in Pennsylvania.
“Coronavirus will be the focus for the remainder of the election. No voter will say he made the right choice to pick a hollow trade deal over the American people’s health,” Sullivan said. “We think this will resonate across the country.”
©2020 Bloomberg L.P.
