China President Xi Jinping came to the G-20 summit meeting in Japan with Trump as a supplicant and left having narrowly escaped disaster.
Xi faced a flagging economy at home and a popular uprising in Hong Kong. In fact, the political crisis that his hardline policies towards the former British colony have caused is so sensitive that the Chinese side insisted that it not be brought up at the summit. The fear in Beijing is that the unrest will spread across the border.
Worse yet, he faced an American president who has his finger on the “kill switch” of the Chinese economy, or at least on both its export sector and its premier hi-tech company, Huawei.
Xi knew, better than anyone, that if Trump imposed 25 percent duties on all $570 billion worth of Chinese imports, the export sector of the Chinese economy, already just limping along, would be fatally crippled. Factories would flee China. Millions would lose their jobs.
Equally worrisome to Xi was the ban on the sale of American components to “national champion” Huawei. Without these key components, China’s premier hi-tech company, which Beijing was counting on to dominate the 5G networked world of the future, would be reduced to a manufacturer of cheap cellphones.
Finally, the Chinese leader knew that his American counterpart had both the authority and the spine to actually push the “kill switch.” Trump’s legal authority to raise tariffs across the board was only days away at the time of the summit (it came through on July 1), and he had done it not once or twice but three times already. Xi would have been a fool to doubt Trump’s resolve, and the “core leader” of the Chinese Communist Party is no fool.
And how could Xi possibly retaliate? He has already imposed tariffs on almost all American imports, and had virtually frozen purchases of American farm products. What’s left? Forcing American companies out of China altogether, the way that South Korea’s Samsung was forced out of the China market?
That would be not only catastrophic for China’s already tattered reputation as a place to do business, it would lead to the further disengagement of the U.S. and Chinese economies.
This is China’s worst nightmare. If our two economies disengage, and China is no longer able to slipstream in America’s powerful wake, the outcome of the current great power competition is virtually certain.
America will win (again) and China will lose.
With no more arrows in his quiver, Xi resorted to making promises, many of which we’ve heard before. He is promising to increase imports of agricultural commodities, for example. We’ve heard this one before, namely at the last G-20 summit. So has Lighthizer and the other American negotiators, who are likely to be much more skeptical this time around. They are looking for concrete commitments to specific import targets for American products, say, $200 billion a year, not just vague promises from around $120 billion at present.
So the negotiations resume, and Trump has taken his finger off the kill switch—for now.
What did Trump give up? Nothing. He’s not going to raise tariffs, right away at least, but the existing tariffs remain in place.
Huawei will remain on the U.S. “entity list” of companies banned from buying high-tech components and software. Temporary licenses will allow U.S. companies to sell certain components to China—as long as these don’t threaten U.S. national security—licenses that can be terminated at any time. A full lifting of the ban will depend upon reaching a trade agreement.
Even when this happens, the state-controlled company will not be able to sell its products in America, the repercussions of which will cost it an estimated 40 percent of its sales.
So Trump has agreed to take his finger off the kill switch—for now.
All this is not to say that the United States has won the trade war. It hasn’t. But thanks to the Trump team’s toughness and negotiating skills, it occupies the high ground.
The final outcome is still uncertain, of course. And the answer to the larger question of whether America or China will own the 21st century is still uncertain.
But what is clear is that the days of China’s one-party dictatorship simply rolling over weak American politicians, and taking unfair advantage of America’s openness and fair-dealing, are over and done.
Steven W. Mosher is the President of the Population Research Institute and the author of “Bully of Asia: Why China’s Dream is the New Threat to World Order.”
Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.