By: Martina Castellanos
China-US Trade War Rhetoric Softens after Phase One Deal, however amid the pandemic, will Sino-American Relations improve or worsen?
On January 15, 2020 President Donald Trump and Chinese Leader Xi Jinping signed a partial trade deal coined “Phase One” as the world’s two biggest economies begin to compromise after an 18-month trade war (Pramuk 2020). The dispute has seen the US and China impose tariffs on hundreds of billions of dollars of each other’s goods, which has hindered both economies’ overall yield. While Trump is accusing China of using unfair trading practices to steal US intellectual property and forced technological practices, China sees the US as trying to constrain its rise as a global economic power.
Here are some of the key features of the Phase One agreement:
- China shall ensure fair and adequate protection and enforcement of intellectual property rights, especially in technological and pharmaceutical- related products, as privacy is needed to promote innovation in these sectors
- China shall provide criminal procedures and penalties to address “willful trade secret misappropriation”, including the production of counterfeit items.
- China will increase purchases of U.S. manufacturing, energy and agricultural goods and services by at least $200 billion over two years.
- The United States will boost Chinese market access to its market for services and services suppliers
Under the agreement, the Trump administration agreed to cut duties on $120 billion in products to 7.5%– from it’s previous 15% (Horsely 2020).
Still, the White House has said it will leave tariffs on another $250 billion of Chinese products in place for now to keep leverage in the “Second Phase” of the deal which is due to take place in November 2020. However, after the insurgence of COVID-19 across the U.S., the ease in which the US trades with China has become a key factor for America’s economy, but more importantly, for life survival.
Even if COVID-19 is contained, the crisis could hinder efforts to move global supply chains away from China and weaken the stance of the US in the coming “phases” of the trade agreement. Though efforts to reduce reliance on China’s supply chain have been underway, the US still heavily relies on China for medical and pharmaceutical supplies. According to the Council on Foreign relations, “an estimated 80% of the active ingredients used to make medications are imported from China”(Palmer 2019).
China is also a major global supplier of disposable medical devices, such as syringes and gloves, and surgical equipment. Over the past decade the country has also exported higher-tech therapeutic and diagnostic products, like joint implants and MRI machines. Due to the ample supply of cheap labor, China has a substantial comparative advantage in trade, putting the United States in the difficult position of choosing between outsourcing to produce cheaper supplies or domestically manufacturing products to avoid strategic and health vulnerabilities.
Though Phase One was the first step to reducing our overdependence on China as a source of cheap medical supplies, COVID-19 has shown just how much the United States relies on China as even “97% of antibiotics sold in the United States come from China” (Lawder 2020).
Currently, The Trump administration is trying to avoid reducing tariffs on imported medical supplies from China, in order to not undercut themselves with their ongoing trade agreements. The administration worries that by reducing tariffs, Trump will no longer have leverage for the future “Phases” of the trade agreement and the United States efforts to reach the greater goal of relying on itself for medications and supplies will become obsolete. “There will be inexorable pressure to relax the tariffs. But the administration is going to hold the line as long as they possibly can because they see this is so fundamental to their trade policy,” said Vanessa Sciarra, vice-president of trade and investment policy with the National Foreign Trade Council. “There’s a lot of internal debate that you can’t give China something for nothing and how to go forward.” Sciarra is intuitively forecasting that if the United States does do away with the tariffs, there is the possibility that China will use this as leverage against the United States in Phase Two of the agreement, and rightfully so.
On March 27, President Trump responded to these critical issues in a daily briefing at the White House by saying “nobody cares about trade” and continued by referencing the agricultural aspect of the trade agreement: “I must tell you this whole invisible enemy has taken over the world…It’s hard to talk about ‘hey how you doing with buying from the farmers” (Xu Klein 2020). After constant shifting of blame, contrasting ideologies, and recovering from a trade war, these two countries are preaching working together closely in order to solve the bigger problem: Covid-19. But will cooperating to halt the pandemic be enough to allow both superpowers truly leave their disputes behind?
Image Source: https://finance.yahoo.com/news/china-us-trade-war-rhetoric-195007794.html
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