Aug 18, 2020 - World

Trade is now the relative bright spot in U.S.-China relations

Illustration of a United States quarter puzzle piece and a Chinese Yuan puzzle piece
Illustration: Eniola Odetunde/Axios

Trade is the last major area where the U.S. is still relying on traditional diplomacy to work through problems with China.

Why it matters: U.S.-China relations are at their lowest point in decades, as both sides have taken an increasingly harder line over Hong Kong, Xinjiang, the South China Sea and other issues. The desire to keep the trade deal alive seems to be keeping the relationship from unraveling entirely.

  • “The one area we are engaging is trade,” White House economic adviser Larry Kudlow said at a press briefing last week.

Driving the news: The U.S. and China were scheduled to meet over the weekend to review the phase one trade deal signed in January, but the meeting was delayed.

  • Beijing may welcome the delay because it provides more time to catch up on import commitments, the South China Morning Post reported.
  • China agreed to increase its purchases of U.S. goods and services by $77 billion this year under the terms of the phase one trade agreement.
  • It has so far fallen short of this commitment, though Chinese officials have attributed this to the coronavirus outbreak and the resulting lockdowns and economic slowdown.

Background: For the first part of Trump's presidency, trade was the primary target of his ire, echoing his rhetoric during the 2016 presidential race, when he railed against China's unfair trade practices.

  • But the Trump administration has increasingly adopted a fiercely hawkish stance on the Chinese Communist Party, and since the coronavirus outbreak, Trump has made countering China a key cornerstone of his re-election campaign.
  • In the past few months alone, the U.S. closed the Chinese Consulate in Houston, levied several rounds of sanctions on Chinese officials and entities deemed complicit in human rights abuses, urged allies to exclude Huawei from their 5G networks, issued an executive order restricting Chinese social media companies TikTok and WeChat, and declared China's activities in the South China Sea to be illegal.

Amid this onslaught of unilateral moves, trade negotiations remain the only major area in which the White House is still publicly engaging in meaningful high-level diplomacy with Beijing.

  • In fact, it seems as though hopes for further progress on trade negotiations played a role in initially delaying the U.S. from taking some of these actions.
  • President Trump told Axios' Jonathan Swan in a June interview that trade negotiations were the reason that he didn't sanction China for human rights abuses in its northwestern region of Xinjiang.

The bottom line: The massive efforts put into the phase one trade deal over more than two years by Beijing and Washington have made both sides reluctant to allow the deterioration of relations to claim this part of the relationship as well.

What to watch: A phase two deal doesn't seem to be in the cards right now — even Trump has said he's not thinking about a second phase right now — so the focus is on preserving the phase one agreement and ensuring both sides are keeping their commitments.

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