“It can’t even be an even deal. If it’s an even deal it’s no good.”
He went further, suggesting that it might be better for the US to wait until after next November’s presidential election to agree a deal.
“I like the idea of waiting until after the election for the China deal. But they want to make a deal now and we’ll see whether or not the deal is going to be right. It’s got to be right,” he said.
That comment left a crucial question hanging. On December 15 the US is scheduled to introduce tariffs for the final $US160 billion of China’s exports to the US that haven’t yet been levied.
Those goods – items like smartphones, laptops, toys and children’s apparel – are the most consumer-sensitive of China’s exports: which is why the administration, which announced them in August, delayed their introduction to avoid impacting the lead-up to Christmas. By December 15 retailers should have acquired their Christmas stock before the tariffs raised their costs.
If there is to be no deal with China until next year – potentially the end of next year – does that mean the December 15 tariffs will be levied as scheduled?
If they were it would come as a significant shock to markets that have consistently adopted an optimistic view of the outcome of the trade war.
US Commerce Secretary Wilbur Ross supported the Trump view that there are no time pressures on the negotiations with China and also said the final round of tariffs would go ahead of December 15 unless there were “some real reason to postpone them.”
The US stockmarket has fallen sharply and US bond yields have dived this week in response to the new uncertainties Trump has injected into the outlook for not just the confrontation with China, but US trade relationships with other major trading partners.
The markets are stretched by conventional standards, held up by the absence of alternatives that generate positive returns. They are acutely sensitive to every development in Trump’s trade disputes, which probably means that a decision to go ahead with the December tariffs and an indefinite deferral of a truce with China would really rattle investors.
The US-China trade relationship and the $US360 billion of US tariffs already in place – and China’s retaliatory measures – have adversely impacted global growth and the US economy itself. More tariffs and a broadening of trade conflicts beyond China would have an even deeper effect on real economies.
The European Union has said it will respond with its own retaliatory measures if the US follows through with its threat to punish France for its digital services tax and there’s also the prospect that Trump will reactivate his interest in a broader range of tariffs on European Union products, most particularly its auto exports, if European markets aren’t opened up to US exporters.
Trump’s love affair with tariffs and the cloak of “national security” that he has used to deploy some of them could also see them used as leverage in non-trade disputes, with the US president suggesting on Tuesday that he might deal with NATO allies who don’t lift their defence spending “from a trade standpoint.”
Until this week it appeared the administration wanted to settle its dispute with China before the start of the election year, putting the more difficult issues it has with the way China manages its economy aside in order to get a deal that, even if it involved rolling back some existing tariffs, it could present as a victory.
In just a couple of days Trump has sowed confusion about the future direction of trade with his grab-bag of actions and threats, accusing Brazil and Argentina (falsely) of currency manipulation, pledging to levy duties on French exports, raising the prospect that there will be no deal with China in the near term (and perhaps even more tariffs) and then suggesting he might use tariffs as leverage in non-trade disputes.
It’s little wonder China, America’s own allies and financial market participants are bemused and disturbed by the erratic and unconventional nature of the administration’s policy announcements and the way Trump delivers them via tweets and free-wheeling, off-the-cuff and often contradictory statements.
Stephen is one of Australia’s most respected business journalists. He was most recently co-founder and associate editor of the Business Spectator website and an associate editor and senior columnist at The Australian.