After publicly extolling the use of tariffs repeatedly, Donald Trump decided to delay the latest set from taking effect. Citing progress in trade talks with China, Trump announced yesterday that he would delay indefinitely the final imposition of massive tariff hikes on imports. Does that signal a deal is imminent, or that Trump might be rethinking the trade war?
We’ll know in a month, reports the Washington Post:
President Trump said Sunday that he will delay a scheduled increase in the tariffs on $200 billion in Chinese imports to allow negotiators more time to reach a comprehensive trade deal with Beijing,the most significant sign yet that Trump is eager to resolve a trade spat with China that has rattled markets and companies around the globe.
The president’s decision to delay the increase in tariffs, which would have taken effect March 2, represents a gamble that his personal intervention can smooth the way to a final deal and quiet skeptics who fear he may be too quick to capitulate to the Chinese. …
Trump, who did not set a new date for the tariff increase to take effect, also said he plans to host Chinese President Xi Jinping at Mar-a-Lago, his Florida estate, to finalize terms of the agreement, should the talks continue to make headway. That meeting, which the president had mulled publicly on Friday, is expected late next month.
It’s the second delay on these hikes, which would have taken all tariffs to 25%. The first came when China appeared willing in December to discuss opening up markets and reforming their approach to intellectual property. Trump then set a 90-day pause on tariff escalation, a deadline that is soon to run out.
Now he’s delayed them indefinitely, which sounds as though his trade team is making some progress. He claimed exactly that in his announcement of a delay yesterday:
Never one to tamp down expectations, Trump told reporters today that he’s planning that “signing summit” already:
— AFP News Agency (@AFP) February 25, 2019
So is it true? CNBC hears that China is more willing to open its markets than it is to reform its IP practices and their requirement to force Western firms to operate as joint ventures. That mechanism allows China access to their intellectual property, a major mechanism for its industrial espionage:
Last week, sources familiar with the situation told CNBC that the United States and China are discussing a late March meeting between Trump and Chinese President Xi Jinping in Florida, news that Trump confirmed on Sunday. The summit is scheduled to take place at Trump’s Mar-a-Lago golf club in Palm Beach, Florida.
Ahead of that confab, China has committed to buying up to $1.2 trillion in U.S. goods, though as late as last week, the two sides were said to be far apart on issues concerning the forced transfer of intellectual property.
The markets have ticked upward a bit this morning on the news of the delay in tariffs, but not overwhelmingly so. As of this morning, the Shanghai index made the biggest move by far, rising 5.6% over its previous close, but no other market had gained a full percentage point.
There may be some reason for skepticism, if not cynicism, on the trade war delay. At the same time this delay got announced, Trump has been preparing to meet with Kim Jong-un in Hanoi for his second summit with the North Korean dictator. Trump needs China to help pressure Kim, and more importantly, needs to have the appearance of having China on his side before the summit takes place. Xi Jinping is a horse-trader too, and will undoubtedly have a full grasp of the leverage he holds over Trump when it comes to dealing with Kim. Xi also knows that Trump needs big wins on both fronts in order to shore up his political status ahead of next year’s elections.
As a result, Trump might feel the need to take whatever he can get from China and claim victory in order to focus on North Korea. Or he might feel like doing the opposite — declaring the W with Kim in order to focus on winning a trade fight with China. He could still do both, which would be remarkable if he succeeds, but a delay now might not necessarily foretell a win later in either direction. It certainly counts as progress, but it still remains to be seen for whom.