American exports have fallen well short of targets in the deal’s first year
DONALD TRUMP is rarely accused of subtlety. His bellicose approach to China’s trade surplus and (more justifiably) its unfair practices was no exception. Swingeing tariffs on Chinese goods did succeed in bringing China to the negotiating table. In January 2020 the two countries signed a “phase-one” trade deal. China agreed to raise its imports of a selection of American goods from $78bn in 2019 to $159bn in 2020, with yet more spending pledged in 2021. The president hailed this as “a momentous step...toward a future of fair and reciprocal trade with China.”
In reality, the deal was limited and trade disputes rumbled on regardless. Worse still, China has “failed spectacularly” to meet that $159bn commitment in the agreement’s first year, according to a new analysis by the Peterson Institute for International Economics, a think-tank in Washington, DC. In 2020 China spent only $94bn on the American goods covered by the deal. That is about as much as it did in 2017, before Mr Trump began his trade war (causing the figure to tumble in the following years). Granted, the numbers in 2020 may have been dampened by the covid-19 pandemic. But China’s economy still recovered enough to grow by 2.3% last year. By June its total imports had regained pre-coronavirus levels.
Most of the shortfall came in manufactures, which made up 70% of goods covered by the agreement. America’s sales to China were meant to reach $99bn, but only managed $57bn—a 5% drop from the year before. China’s purchases of cars and aircraft fell painfully short of the Trump administration’s aspirations. Energy shipments did particularly poorly, reaching just $10bn of the targeted $26bn. Embarrassingly, China may not even be the culprit. America seems to have set ludicrously high targets that its own energy producers could not meet.
Farm exports also fell short, at $27bn of the pledged $33bn. American farmers nonetheless gorged on billions of dollars of subsidies—dished out by Mr Trump’s administration to protect them from the effects of the trade war. Even the deal’s few apparent successes could prove fleeting. Sales of medical products to China beat the target, but were spurred by the pandemic. So did semiconductor exports, but they were accelerated by America’s threat to limit future sales of chips on national-security grounds, which prompted Chinese firms to stockpile them.
The Peterson Institute has also measured the carnage that Mr Trump wrought in the first place. The authors note that in 2009-17 China’s imports from America grew at a similar rate to those from other countries (when considering the goods covered in the phase-one deal). They used this to create a hypothetical scenario, in which imports from the United States continued to track the growth rate of those from the rest of the world in 2018-20.
In this counterfactual universe, China’s spending on American goods in that three-year period would have been roughly $340bn. Mr Trump’s tariffs helped reduce the real total to less than $260bn. In contrast Europe, in its much-criticised recent trade pact with China, managed to get much of what Mr Trump won without launching a self-harming trade war to win it. The bloc’s exports to China rose by a fifth in 2017-20.
As President Joe Biden devises his own trade strategy for China, parts of the Trump team’s approach may be worth adapting. Among other worthy achievements, the think-tank highlights getting China to cut certain non-tariff barriers, accept more foreign investment and punish intellectual-property violations. Yet overall, its report shows that Mr Trump’s approach was foolish. To manage trade relations with bilateral purchase targets is to wield a blunt weapon that is easily overpowered by events. America’s efforts would be better spent, the think-tank argues, working with allies who support free markets to tackle China together.
