What Happens To The Phase One China Trade Deal If Biden Is President?
If the polls are right, and who is saying that they are (?), Joe Biden will be elected president on November 6. What happens to one of the biggest signature trade policies of the Trump era in that case — the “amazingly great” China phase one trade deal?
Best hunch: it’s dead.
Joe Biden is not going to focus on trade with China. Tariffs will eventually fall one by one. A Biden presidency is more likely to leave China policy up to the Commerce Department (adding Chinese companies to Entity List that restricts companies from doing business with them) and the State Department, who will likely slap China with individual Magnitsky Act sanctions, with a handful of non-household corporate names thrown in there, for human rights issue associated with Uighur Muslims in Xinjiang.
“I suspect that Phase one survives through November, but risks to the deal rise somewhat as the U.S. elections comes within the 60-day notice period for the deal,” Brian McCarthy, chief strategist for Macrolens, told clients in his weekend report to clients on Friday. “The market will view a U.S. exit negatively, but the reaction might be muted by the fact that in the event of a Biden victory, Phase One is dead anyway.”
China expects the U.S. to denounce decoupling and promise to work on climate change to appease Biden.
Biden’s adversary has a totally different view.
In a Fox News interview, Trump raised the possibility of decoupling the U.S. economy from China. In a video excerpt, Trump told interviewer Steve Hilton about splitting with our top source of imports, “It’s something that if they don’t treat us right I would certainly, I would certainly do that.”
As for bilateral relations under a Biden Administration,China is offering to trade away a number of Democratic Party wishlist items in a return for Washington to give up on a number of bills in the House and Senate designed to reshore essential medical supplies, and attacks against Chinese multinationals ByteDance — TikTok’s parent — and Huawei, to name the most famous names in the crosshairs.
“We now know that Beijing’s greatest wish is for U.S.–China relations to return to the days of Barack Obama’s administration,” says Michael Shoebridge of the Australian Strategic Policy Institute.
On August 5, China’s Foreign Minister Wang Yi offered a new U.S. administration a do-over, saying Beijing wanted to restart dialogue with the U.S. “at any level, in any area and at any time. All issues can be put on the table for discussion,” Wang said.
But that is already happening.
Xi Jinping was the first leader to meet with President Trump in the U.S. in his first year in office.
Robert Lighthizer, the U.S. Trade Representative, spoke again with this counterpart Liu He, on Monday to discuss trade deal progress.
Wang said in his address that was clearly meant to make its way to Biden’s basement that Beijing “will work” with the U.S. to ease current tensions and “put relations back on the track of no conflict, no confrontation,” and China’s favorite words “mutual respect.”
This is playing right into the Biden team’s mission statement of working with other countries and playing nice, because Trump plays mean. Biden believes politics is personal. Trump, on the other hand, believes politics is a business deal, a merger and an acquisition.
But as Shoebridge points out, this “great man” theory of leadership is a failure. That’s not how politics plays out. It’s definitely not how deals are made.
“The fundamental fact of strategic and technological competition between China and the U.S. makes any personal chemistry of far less value,” he writes. “Xi Jinping simply won’t concede on issues because he’s shared 25 meals and travelled 17,000 miles with Biden. But he’d be delighted if Biden did.”
Also, this is worth a read on a Sunday night: