of the administration want to have their China cake and eat it, too. They want
to posture about being tougher on China than Biden, Obama, or Bush, but take no
action that might upset Wall Street, swing voters, or in some cases President
Trump. The result is proclamation after proclamation of responses to Chinese
economic aggression, to be implemented at some later date.
Start with the main event, the phase one trade deal. Eighteen months ago, the president and United States Trade Representative Lighthizer disagreed over whether Chinese commitments being negotiated were enforceable. The boss turned out to be right — they aren’t.
Rather than soaring over the higher bar of the 2017 level, as planned, US exports to the PRC in the first half of the year couldn’t reach the lower bar of the 2019 level. It’s not just COVID — China claims its overall imports slipped only 3 percent on-year through June. The Trump administration insists the trend is sharply positive, but American exports to China fell from May to June while those to Canada and Mexico jumped.
Agriculture shipments to China should expand quickly enough to exceed half the 2020 target. Energy exports will rise in the next few months but probably won’t get to half. China has seen more manufacturing overcapacity due to COVID, inhibiting imports. First-quarter US services exports (latest) were $10 billion lower than the first quarter of 2017. China is tens of billions of dollars short and US “enforcement” consists of pretending everything’s fine.
The second major component of phase one was improved protection for intellectual property (IP). In the past with IP, among other topics, the Chinese government has lied again and again. Yet here China can’t fall short, because the Trump administration has offered no measures by which to judge IP implementation or even exactly how it is monitoring Chinese actions.
It’s not just phase one where the administration talks more than it acts. In May 2019, the Department of Commerce claimed to be taking decisive steps against Huawei. An endless series of amendments and 15 months later, there is finally a set of restrictions on Huawei that might matter. But it probably won’t, at least not for a good while.
The only thing required for various kinds of deals with Huawei is license approval. While individual company information must be protected, Commerce can indicate what proportion of license applications have been rejected. It hasn’t. It’s very difficult to believe sales to Huawei will be sharply restricted when Commerce has failed for two years to implement export controls ordered by Congress on an overwhelming, bipartisan basis.
Investment results also speak louder than words. The Trump administration first negotiated more capital market access in China in phase one, then more recently has told investing institutions to avoid the PRC. Yet May (latest) saw the second-highest stock of American portfolio investment in Chinese securities ever. Some Chinese stocks are of course listed here, and the Trump administration demands they disclose fully or be delisted. But in 2022.
Finally, there’s TikTok and WeChat. At the end of last week, the true TikTok executive order appeared, replacing the first, useless one. It features a 90-day deadline instead of 45, pushing required action past the election. A genuine WeChat order must also replace the initial blank slate. It’s a solid bet that enforcing any serious restrictions will not occur until November or later.
In some cases, it’s a good thing for the Trump administration’s bark to be worse than its bite. But the gap between the administration’s China talk and China walk is large and growing. In 2021, this could become a serious policy problem for the US. In September and October, it could become a political problem for the Trump campaign.