BEIJING – The US-China trade war won't go away under President Joe Biden.
Biden won't confront Beijing right away, say economists, because he wants to focus on the coronavirus and the economy. However, Biden is likely to put pressure on trade and technology issues again, prompting President Donald Trump to raise tariffs on Chinese imports in 2017.
Negotiators could tone down Trump's focus on reducing China's billion dollar trade surplus with the United States and do more to open up its state-dominated economy, which is more important in the long run, economists say. However, no abrupt tariff cuts or other major changes are expected.
“I think Biden will focus more on extracting structural reforms,” said Louis Kuijs of Oxford Economics. “It will be some time before we get a shift or explicit announcements.”
Biden is reviewing tariffs on Chinese goods and wants to coordinate future moves with allies, White House spokeswoman Jen Psaki said on Monday. It gave no indication of possible changes.
“The president is determined to stop China's economic abuse,” said Psaki.
Trump responded to complaints shared by Europe and other traders, but Washington has little to show for its bloody war. It brought President Xi Jinping's government to the negotiating table, but disrupted world trade, raised consumer prices, and killed jobs.
The last major development was a year ago when Beiing promised in the January 2020 Phase One deal to buy more soybeans and other US exports and stop pressuring companies to hand over technology.
China lagged behind with these purchases. Amid the turmoil in the coronavirus, it bought roughly 55% of what it promised. When it comes to technology policy, some economists say these changes are important, but wonder if they count as a win. They say Beijing could have done it according to its own plans anyway.
China has met more resistance than ever in Washington because of its trade balance, territorial disputes with neighbors, crackdown on Hong Kong, reports of abuses against ethnic Muslims, and allegations of technology theft and espionage.
“The soil has changed a lot,” said Nathan Sheets, former Treasury Secretary of State for international affairs in the Obama administration.
Katherine Tai, Biden's election to replace US sales representative Robert Lighthizer, made a speech on China earlier this month.
“We are facing increased competition from a growing and ambitious China,” said Tai. “A China whose economy is run by central planners who are not exposed to the pressures of political pluralism, democratic elections or public opinion.”
That means China will have to make changes to move forward, said Raoul Leering, ING's global trade analyst. He said that while many of Trump's statements were “close to nonsense,” he was right that China had more trade barriers and official interference in the economy than the United States.
“It will depend on China at what speed they reform and change their policies to see if Biden will remove trade barriers,” he said.
Chinese officials say they want better relationships but haven't announced any possible concessions.
The State Department Wang Yi, quoted by the official Xinhua News Agency, expressed hope that Washington “will regain its rationality.” A State Department spokeswoman, Hua Chunying, appealed to Washington “to get China-US relations back on track as soon as possible.”
After two and a half years and 13 rounds of talks, the negotiators have yet to address one of the greatest irritations for China's trading partners – the status of politically favored state-owned companies that dominate industries from banking to oil to telecommunications.
Europe, Japan and other governments criticized Trump's tactics but complained that Beijing is stealing technology and breaking market-opening promises by subsidizing companies and protecting them from competition.
These complaints are at the center of a government-led development model that Communist Party leaders see as the foundation of China's success.
They are building “national champions” like PetroChina Ltd., Asia's largest oil producer, and China Mobile Ltd., the world's largest subscriber telephone operator. In 2013 the party declared state industry to be the “core of the economy”.
Outside the government sector, the party promotes industry leaders in solar energy, electric cars, next generation telecommunications, and more.
Beijing could offer to drop its claim to a developing economy, a status it insists on despite becoming one of the largest manufacturers and a middle-income company, Leering said. According to WTO rules, the Communist Party can thus protect industry and intervene more strongly in the economy.
Giving up “would be a very important gesture,” said Leering.
Trump's opening shot in 2017 was a $ 360 billion tax hike on Chinese imports. Beijing retaliated with tariff increases and suspended soybean imports, and hit the farm states that voted for Trump in 2016.
The US trade deficit with China decreased 19% year over year in 2019 and 15% in the first nine months of 2020.
This did not mean that Trump's goal of relocating jobs to the US was achieved. The importers instead relocated to Taiwan, Mexico and other suppliers. The total US trade deficit decreased slightly in 2019, rising nearly 14% through November last year.
The Congressional Budget Office estimates that tariff increases cost the average U.S. household nearly $ 1,300 in the past year. Corporations have postponed investments and reversed some of the benefits of Trump's 2017 corporate tax cut.
A study by the US-China Business Council and Oxford Economics found that the US economy lost 245,000 jobs because of the tariffs. Even a modest reduction would create 145,000 jobs by 2025.
Trump added pressure by telling telecommunications equipment giant Huawei Technologies Ltd. and other companies that US officials viewed as a potential security risk and threat to US industrial leadership, disrupted access to US technology. The Americans were ordered to sell shares in Chinese companies. According to Washington, they have links with the military.
The Communist Party then promised to accelerate its two-decade-old campaign to turn China into a “technology power” in its own right.
White House spokeswoman Psaki said Biden was also looking into these questions but gave no indication of possible changes.
Biden wants to hold Beijing accountable for “unfair and illegal practices” and ensure that American technology does not facilitate military construction, said Psaki.
Biden's envoys have the opportunity to tweak Trump's penalties by dropping some in exchange for changes in Chinese policy, Kuijs said. However, he and other economists say it is unlikely to cut tariffs and restrict access to technology and financial markets.
“It is difficult to see the US reversing recent Hawk trends in China policy,” JP Morgan Asset Management's Sylvia Sheng said in a report.
Technical restrictions are unlikely to be relaxed as Washington “sees China as a competitor,” said Tu Xinquan, director of the WTO Studies Institute at Beijing University of International Economics.
Tariff cuts appear to be the only short-term option, Tu said. He said Biden could defend getting rid of taxes that the World Trade Organization said had not been properly imposed.
“In that case, he wouldn't lose face,” said Tu.
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The AP researcher Yu Bing in Beijing contributed to this.
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Wiseman reported from Washington.