No. of Recommendations: 11
Nobody says 'don't trade with China'. But relying on them for basic necessitates and/or strategic goods is madness.But that rules out decoupling. If we're going to keep having very large bilateral trade flows with China, we're not heading in the direction that Navarro and Lutnick wanted. And even then, nothing has been agreed to (even in principle) that would change the nature or degree that we rely on them for basic necessities and/or strategic goods.
The Chinese delegation basically told us that once President Biden came into office, they just ignored their obligations."It's hard to see how that's true. China was "ignoring their obligations" on the most important part of the Phase One agreement, the increase in U.S. exports, the moment the deal was cut - they didn't increase imports by the required amount when
Trump was in office, either. American companies were never in a position to provide the increased exports that the deal called for even when it was agreed to - in no small part because the retaliatory tariffs that China had imposed during the 2017-2019 trade war ended up decimating U.S. export capacity to China in critical sectors (especially automobiles) and giving massive space for China to strengthen their domestic markets. So China ended up agreeing to provide "access" to their markets that U.S. firms were utterly incapable of utilizing. And of course, COVID ended up wrecking the best-laid plans of mice and men anyway - so the two-year window that Trump negotiated for ended up being of little value (and not worth the damage caused by the prior trade war):
https://www.piie.com/blogs/realtime-economics/2022...Since the increase in U.S. exports was only a commitment for two years, and half of it was during Trump's administration, it's really hard to lay that failure mostly on Biden. Much of the rest of Phase One
was complied with by China - they adopted the delineated IP legislation, and they did increase access for U.S. financial services firms. It was the import levels that were the major failure, but that was (again) due mostly to what Trump did and not Biden.
Now, I have no doubt that Chinese officials
told Bessent that it was all Biden's fault, because that's something that would make Trump happy. And that's the party line that the GOP has been promoting to defend what ended up being a strategically disastrous trade policy. But the truth is that the failures of the agreement were mostly because of flaws in what Trump did, not lack of "enforcement" in the first year of the Biden Administration.
