Home Economy Here’s Why The China Trade Deal Fell Apart

Here’s Why The China Trade Deal Fell Apart


Readers who have been paying close attention to every leak related to the ongoing US-China trade talks might remember this FT story from six weeks ago about Beijing’s penchant for returning trade-deal draft proposals to Washington riddled with red-line stikeouts.

We only bring it up now because, according to a play-by-play published by Reuters Wednesday morning, it appears President Trump finally lost his patience with Beijing when they returned a draft trade deal with strikeouts eliminating virtually all of the major concessions made during the past few weeks.

Though reports about Beijing’s unwillingness to compromise had begun appearing with more regularity during the preceding week, according to Reuters, it appears Beijing was deliberately trying to provoke President Trump. And if this was indeed China’s goal, it appears it succeeded.

The diplomatic cable from Beijing arrived in Washington late on Friday night, with systematic edits to a nearly 150-page draft trade agreement that would blow up months of negotiations between the world’s two largest economies, according to three U.S. government sources and three private sector sources briefed on the talks.

The document was riddled with reversals by China that undermined core U.S. demands, the sources told Reuters.

In each of the seven chapters of the draft trade deal, China had deleted its commitments to change laws to resolve core complaints that caused the United States to launch a trade war: theft of U.S. intellectual property and trade secrets; forced technology transfers; competition policy; access to financial services; and currency manipulation.

U.S. President Donald Trump responded in a tweet on Sunday vowing to raise tariffs on $200 billion worth of Chinese goods from 10 to 25 percent on Friday – timed to land in the middle of a scheduled visit by China’s Vice Premier Liu He to Washington to continue trade talks.

One administration insider said the changes “undermines the core architecture of the deal”, particularly since Robert Lighthizer has prioritized an enforcement regime that’s closer to something typically used for punitive economic sanctions than a trade deal.

Lighthizer and Treasury Secretary Steven Mnuchin said earlier this week that Trump’s tariff threats were prompted by Beijing reneging on its promises. But they refused to disclose any details. It now appears that Beijing has gone back on practically all of the concessions it had made during the negotiations, including deals on currency stabilization, enforcement and market access for cloud-computing firms, to name a few.

But despite the steady stream of optimistic trade rhetoric, the only real surprise here – as one administration insider put it – is that it took this long for the White House to blow up the deal.

Lighthizer and U.S. Treasury Secretary Steven Mnuchin were taken aback at the extent of the changes in the draft. The two cabinet officials on Monday told reporters that Chinese backtracking had prompted Trump’s tariff order but did not provide details on the depth and breadth of the revisions.

Liu last week told Lighthizer and Mnuchin that they needed to trust China to fulfil its pledges through administrative and regulatory changes, two of the sources said. Both Mnuchin and Lighthizer considered that unacceptable, given China’s history of failing to fulfil reform pledges.

One private-sector source briefed on the talks said the last round of negotiations had gone very poorly because “China got greedy.”

“China reneged on a dozen things, if not more…The talks were so bad that the real surprise is that it took Trump until Sunday to blow up,” the source said.

“After 20 years of having their way with the U.S., China still appears to be miscalculating with this administration.”

Though Vice Premier Liu He will visit Washington later this week, the notion that a deal can be salvaged, at least in the short term, looks almost impossibly remote. And it’s not hard to see why.

Even as the standoff in the Pacific between the US and China has grown increasingly tense – thanks in part to Washington’s belligerently pro-Taiwan (and its refusal to allow Beijing to have its cake and eat it, too when it comes to contested islands in the South China Sea) – Beijing has put on a happy face and parroted Washington’s line that American military meddling in the region is a separate issue.

But as Washington prepares to sell billions of dollars in arms to Taiwan (only months after President Xi vowed to bring the errant province back under Beijing’s control), it appears the Chinese might finally be losing their patience.

On Tuesday, Foreign Ministry spokesman Geng Shuang told reporters that Beijing had lodged “stern representations” with the US over a House bill expressing support for Taiwan. Beijing complained that this “severely violates” the longstanding “One China” policy and represents “gross interference” in China’s affairs.

While the Communist Party might have been willing to countenance repeated American intrusions into the South China Sea, Xi earlier this year threatened to smite anybody who dares interfere with Beijing’s plans for Taiwan.

Walking away from the trade-deal table might only be the beginning.

via zerohedge


  1. Time to bring them to their proper place in the world, they have always been liars and unwilling to deal honestly wirh the rest of the world, time to treat them as what they always were. CROOKS.

  2. Let’s look elsewhere for these products. China isn’t the only place in the world. There are other countries which can supply us with better goods. Just because it’s cheap, doesn’t mean it’s good. I bought leather sofas made in china and they lasted 3-5 years. The leather got shabby, cracked and discolored and the cushions collapsed, after about 2 years. My next set of leather couches came from Italy. I paid twice as much, but they have lasted almost 15 years now, showing little wear, the cushions are in great shape, even after my little grandchildren jumped on them, got them dirty and the frame is still solid. The leather is still pliable and soft. I may have these couches another 5 years at least. Do the math! You get what you pay for. Same deal with Italian shoes. Costly yes but they last for years as opposed to one year if they are made in china. Would you rather buy new shoes every 6 years or buy 6 pairs every 6 years. Oh fashion changes you say? Italian shoes are classic, timeless fashions, always stylish. I want quality that lasts, not cheap crap that falls apart in little time.

  3. Yes, All China made is Garbage, but the Costco is who Steal The Money From US, they paid $1, And Sell to Us For $20. But We Are Guilty , Because You Still Go to the Stupid Costco To buy “ GARBAGE”

  4. Why do we need the chinks in the first place?
    They are as big of liars as Korea ! Any items they make or sell were first made here! We can sustain America by our own people if we vote out the sorriest politicians
    Then focus on our own resources. MAGA!

  5. Ok China won’t play fair but that is not anything new but what is new is that we have a president that won’t let us be taken advantage of and an economy that is the best in the world . Now it is time for the everyday citizen to be very angry that China wants to own us and steal from us and control us so if there are any products that are made in China and we can live without them it’s time to look for alternative products that are made in the USA or do without that junk that comes from there until they find out just how serious this president and our citizens are this time .

  6. Maybe China is speaking to the Democrats. There seems a lot of travel by Pelosi and others who recently went overseas. How about Bill & Hillary? Didn’t they go to China? Our congressional folks are continuing their decision that President will lose the election. They have undermined this
    President the entire time he has been in office. Bill & Hillary, Comey, and all the others who are sabotaging President Trump. It’s also time the FBI guy “Wray” be fired. He is not cooperating the requests from investigators!

  7. China is being stupid as they are losing much more then we are. When their economy tanks, they’ll be more reasonable. Bottom line: we don;t need China, other’s will fill the void, but China needs us to buy their stuff.

  8. The last item I got which said “Product of China” was actually made in Taiwan: A box of plastic 1/72 scale “swords & sorcery” wargaming miniatures. Lizard-men. These appear pretty good, but they’re just injection-molded plastic. Not much potential for things to go wrong when manufacturing something like that.

    Now I have a backlog of painting to do.


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