12/19/2019

China trade negotiation fact of the day

"Elsewhere you will see Paul Krugman suggesting Trump has lost the trade war, but I don’t think he comes close to even seeing what the trade war with China is about. No matter what Trump says, the trade war is not about lowering the trade deficit. It is about (for a start) two major considerations: a) ensuring that national security-motivated partial economic decoupling takes place on terms not so unfriendly to America, and b) giving America levers to make sure China does not make such significant inroads into the world’s tech infrastructure, most notably with 5G but not only.

The stipulation of Chinese purchases of American exports, which probably they will not and cannot meet, is in fact a lever to give the United States enforcement power over the less tangible parts of agreement, which is indeed most of the agreement. We want China to be in default of the agreement terms, so we may threaten them with tariffs to enforce compliance elsewhere, and so that is a better rather than worse outcome for the United States."