Even if Commerce Secretary Wilbur Ross still goes to China this weekend as planned, his boss, President Donald Trump, keeps undermining his negotiations to defuse the trade war with Beijing.
Trump on Tuesday announced plans to slap penalties on $50 billion in Chinese imports, and a Chinese government spokeswoman quickly complained that Trump was doing an “about face” and was in danger of “squandering” an opportunity, according to the South China Morning Post.
Ross, who is in Paris for European trade talks, was still intent on traveling to Beijing as of Wednesday, according to a source familiar with his plans. But even as preparations continue, Trump’s latest moves are making it unclear what Ross can accomplish.
“If you’re trying to send signals, you’ve completely muddied this and nobody knows what signal you’re sending,” said Phil Levy, a former Treasury Department official now at the Chicago Council on Global Affairs.
Ross was supposed to follow a path laid out by Treasury Secretary Steven Mnuchin and other White House moderates when they announced this month that a simmering trade war was “on hold.” China and the U.S. had suspended plans to slap tariffs on each other’s goods and Beijing had agreed to buy more U.S. farm and energy products to help close a $375 billion trade deficit.
White House insiders may be calling Trump’s tariff announcement this week “negotiating leverage,” but Chinese officials on Wednesday made it clear it’s not putting them in the mood to agree to buy more U.S. goods.
“When it comes to international relations, every time a country does an about face and contradicts itself, it’s another blow to, and a squandering of, its reputation,” Chinese Foreign Ministry spokeswoman Hua Chunying said on Wednesday, according to a Reuters translation.
China hasn’t made any retaliatory moves yet, but it could revive its plan to retaliate for U.S. tariffs by raising penalties on $50 billion of U.S. exports, including in crucial industries like soybeans, airplanes, automobiles and chemicals.
Meanwhile, the deep rift between moderates and China hawks in the White House erupted publicly again on Wednesday as various factions sought to get their messaging out. Trump trade adviser Peter Navarro — a China critic who got into a public screaming match with Mnuchin during trade talks in Beijing this month — told NPR that Mnuchin was wrong to characterize the dispute with China as a “trade war.”
“That was an unfortunate soundbite, basically for two reasons,” Navarro said. “One is that what we’re having with China is a trade dispute, plain and simple. They engage in a whole range of unfair trade practices. The second thing is, the president has said we lost the trade war long ago.”
The increased tensions are creating renewed uncertainty for U.S. farmers and energy producers. A joint statement issued after high-level talks in Washington this month was devoid of any hard numbers but did say Beijing had agreed to make “meaningful” additional purchases of U.S. agriculture and energy products.
Last year, China imported around $20 billion worth of U.S. farm goods. More than half was soybeans, or $12.4 billion worth.
In addition, Beijing has already imposed retaliatory duties on around $3 billion worth of U.S. pork and other agricultural exports after Trump set new duties on Chinese steel and aluminum exports.
That prompted the pork producers on Tuesday to urge the Trump administration to persuade China to lift the duties, not realizing the White House had already taken steps to ratchet up trade tensions with Beijing again.
“Since March 1, when speculation about Chinese retaliation against U.S. pork began, hog futures have dropped by $18 per animal, translating to a $2.2 billion loss on an annualized basis,” said Dermot Hayes, an economist at Iowa State University, in a statement. “While not all of this lost value can be attributed to trade friction with China, it is certainly the main factor.”
It may be hard for Ross to negotiate a deal helping farmers and energy producers even if tensions cool off.
Previous administrations have pressed China to increase purchases of U.S. farm goods only to run into an array of regulatory barriers, as Jason Hafemeister, trade counsel for the USDA, outlined in a blog post earlier this year.
Those include import restrictions on poultry, rice and other grains, a “dysfunctional approval process” for genetically modified crops and a ban on certain veterinary drugs and growth promotions that limit the U.S. ability to sell meat products in China, Hafemeister wrote.
Ross may hope that negotiating long-term sales contracts will eliminate those barriers through “brute force,” said Christine McDaniel, a senior research fellow at the Mercatus Center at George Mason University in Fairfax, Va.
“That’s the only thing I can think of that would make sense from an economics perspective,” McDaniel said. But it would be better for the Trump administration to focus exclusively on breaking down the barriers and let companies make their own sales, she argued.
“What U.S. companies really want is certainty in the marketplace. Why do they need the U.S. government going over and trying to get business for them? Can’t they do this own their own?” McDaniel asked.