How Trump’s Trade War Went From Method to Madness

I’ve been covering this trade war for almost three years now, and oftentimes it looks very chaotic. The China trade deal is
dependent on one thing, do I wanna pick it. If we don’t make a deal with China I’ll just raise the tariffs even higher. Thank you very much. And it’s really hard to think
back to the beginning of it, but how it really started actually seemed like there was a strategy to it. Over the course of the
U.S.-China Trade War, Trump’s aggressive policies
and unpredictable behavior has managed to bring the Chinese
to the negotiating table. We’ve come to a very
substantial phase one deal. China will continue to eat your lunch unless somebody takes a stand, and it just so happens
that it was Donald Trump that took the stand. We’re close. With the promise of that phase one deal looming on the horizon, can
that same aggressive strategy produce meaningful reform in China? I wrote a paper during
the Obama Administration saying people are not taking
China seriously enough, and the President has
to be directly involved for American policy to
actually make sense. I think in some ways it’s better to wait ’til after the election with China. But, I’m not gonna say that. I just think that. Now the President is directly involved and American policy doesn’t make sense. The reality is that the
Trump Administration has done this in a much
more aggressive way than previous administrations have. It was an asset going into this trade war. It may have been a liability in the end. This is a case study of when negotiating tactics
turn from method to madness. We can’t continue to allow
China to rape our country, and that’s what they’re doing. It’s the greatest theft in
the history of the world. President Trump ran a successful campaign of denouncing China’s
unfair trading practices. They take our money, they take our jobs, and we owe them $1.6 trillion. I think it’s important to understand that the President inherited
a very difficult situation, one where we probably
should have addressed some of these problems
with China a lot sooner. But I think the President
had great wisdom and courage to step up and realize that we really can start to make progress. And after becoming President his team began devising a strategy on how they could rebalance
the relationship with China. And this man, Derek Scissors, was part of those initial conversations. The goal starts with we’re gonna focus on intellectual property, which we were trying to decide
how do we get the Chinese to reduce their intellectual
property coercion and theft. They weren’t gonna stop,
but how can we reduce it? How can we show we’re
serious about this issue, change their behavior? And that got pulled into
the President saying, “I want high tariffs. “I wanna reduce the trade deficit.” Which is a completely different goal. Putting tariffs on all firms
doesn’t discourage theft and coercion of intellectual property, ’cause it doesn’t punish the guilty. It punishes everyone. Tariffs are really the big
bazooka in the trade world. You don’t like to use them normally, or if you do use them in the trade world, you tend to use them
for short-term leverage to try and get someone
to the negotiating table. In March 2018 Ambassador Lighthizer, the trade representative, was
testifying on Capitol Hill, and he was kind of laying out
what he called an algorithm. The purpose of your algorithm
is to pick out things to the extent you can
that are in that category. Things that are in the category
have the maximum effect on China and the minimum
effect on U.S. consumers. The initial number that folks at the U.S. Trade Representative’s
office came up with was $34 billion. And the President looks at it and says, “Well, that’s not big enough.” And we’ve seen this a
lot in our reporting, covering this trade war, that the President really
likes round numbers. A second list of $16 billion of Chinese goods is published, raising the total initial
tariffs to $50 billion. And while looking back,
this may seem haphazard, it is part of President Trump’s strategy. And this is just the beginning. I wanna tell you that. This is just the beginning. Donald Trump has always
had two things he’s tried to accomplish
through these trade wars. One is selling it
domestically to his base. He wants to be seen to be
punching China in the nose. And the second thing is his
old art of the deal approach, and that is he likes to destabilize people across a negotiating table. This administration has
kind of prided itself on being unpredictable. Kinda the notion that unpredictability is a real strength in a negotiation because if they don’t know
what they’re gonna do, somehow they’re gonna give you more. But not everyone agrees
with that sentiment, at least in regards to the larger intent of getting a deal done with China. To me they haven’t been
unpredictable at all. I think the President has been saying for two and a half years that he wants to have a deal with China
if he can get a deal that is good and that
is in U.S. interests. And he’s gotten a deal with Korea, and he’s gotten a deal with Mexico, and he’s gotten a deal with Canada, and he’s gotten a deal with Japan. And we’re having these
negotiations with China. Early on the maximum pressure strategy only resulted in the Chinese responding with tariffs of their own, going after areas that could
hurt Trump’s political base, imposing tariffs on the auto industry, pork, and especially soy beans. Once the Chinese stopped buying soy beans the impact on the
markets was pretty stark. Immediately the price collapsed and farmers started getting hit. So when you engage in this
tit-for-tat tariff war the question is really who can live with the pain for longer. And obviously that is a
question of political will, and that’s always gonna be the case. And there’s sort of no way around that. Fortunately for us, President Trump has shown that he has that political will. For the rest of 2018 the two countries would raise tariffs back and forth. The U.S. would go from its
initial 50 billion in tariffs to 250 billion. And China’s total tariffs would now hit 110 billion of U.S. goods. Eventually these tariffs would
have their desired effect. In December of 2018 President Trump and Chinese President Xi Jinping would meet face to face in Buenos Aires. Start on meeting we’ll be talking about a number of topics. At that dinner in Buenos Aires, the two leaders agree that
they won’t raise tariffs on each other anymore
or at least for 90 days while they try to negotiate a new deal. Over the spring the two
sides keep negotiating, but the Trump Administration seems to be moving the goalposts, or at least that’s how the Chinese see it. One, they refused to lift
tariffs as part of any deal and secondly Trump seems
to be constantly increasing the amount of purchases he
wants to see from China. At one point he goes from
$1.2 trillion over six years to a $2 trillion number and
that just seems both impetuous to the Chinese but also
economically impossible. By April the two sides create a 150-page document, and there’s optimism
that a deal is in sight. And the White House was very confident that this tough negotiating
strategy from the President has really turned out to get results and fixed the issues that they
went into this trade war for. My understanding is that both sides were actually discussing
where the leaders would meet to sign the agreement. However, in the final
stages of negotiating the Chinese began to walk back some of their larger concessions, most importantly, China
didn’t wanna commit to making legal changes for the U.S. And I think what happened here is that China thought that
Trump wanted a deal at any cost and that he was so out
there promising this deal that he wouldn’t mind if they took some things off the table. That’s the point where
I think the President kind of got fed up and the
events in the negotiations led to an entirely disproportionate
response on his part. In a tweet on May 5th Trump suddenly raised tariffs on the existing $250
billion worth of goods and also threatened that he would tax the remaining $325 billion
worth of Chinese imports. That tweet I read on a plane. I was like, okay, I’m
going to buy WiFi now, and I worked the entire
plane ride over there. Days later Trump again
escalated the dispute by placing Chinese telecom
giant, Huawei, on a black list. That was the biggest slap in
the face for the Chinese yet and relations further deteriorated. We’re having a little squabble with China because we’ve been treated very unfairly for many, many decades. But in another face-to-face meeting, this time in Osaka, Japan, Trump and Xi were able to negotiate another truce on further aggression. So covering this we often have deja vus, and think, well we’ve
seen this movie before. They have a truce, it goes
on for a couple months until Trump realizes China, again, didn’t live up to its promises. And that’s when Trump unleashed another series of tweets. So in early August Trump
decides to escalate things again and announces that he is gonna put tariffs on the remaining imports from China. Importantly it’s also for the first time really gonna hit consumers. It’s gonna hit things like smartphones, toys, kids clothes. And this is the first
time that the trade wars are really gonna come home
for a lot of Americans. After a year and a half
of all this madness Trump’s advisors told him if
you want to get reelected, you have to stop this now. We need to find an off ramp. And so they came to him for
the first time in September and said, “Why don’t we
pocket some of these wins? “Why don’t we get
something good for farmers “and do something like a partial deal?” The August tariff threats were split up. And the ones that would
hit consumer favorites were given a December 15th deadline, with the hopes that a deal could be struck by the end of the year. A tremendous deal for the farmers. A purchase from 40 to $50 billion worth of agricultural products. It’s actually hard as someone who’s been following
this for several years to really care about the phase one deal. Agriculture is not going to
solve the trade imbalance, it’s not going to bring back
U.S. manufacturing jobs. For this year if you sign phase one, you don’t sign phase
one, it doesn’t matter, you’re not gonna get any
meaningful economic changes from the Chinese in 2019 or 2020. One of the big questions
around this trade war is was it worth it? The real question is are we gonna get future phases in a negotiation? And are you gonna get some
meaningful changes in China? And a lot of people in Washington, certainly a lotta
long-time China watchers, feel like that’s not the case. I think we’re finally
having serious negotiations with China after many
years of frustration, and I think everyone has
finally started to realize that we have actual
leverage in this situation and that we have the opportunity to improve the type of trade arrangements that we have with China. 20 months and many false dons later, what have we learned about the use of this maximum pressure campaign? And can this strategy of unpredictability really work over the long term? Just so you understand, I’ve
been very mild about it. Very, very mild. There’s a long way I can go. I think, number one, this just shows that trade
negotiations are tough. And one of the kind of
shortcomings of this negotiation has been we’ve kind of
been all over the map. I mean, at some points this negotiation’s been all about agriculture. Other points it’s been all about the structural issues like IPR. The main problem the president has is he wants us to wrap up too quickly. The President wants this done now. He wants to run on it. He wants to say, I solved this problem. So because of that, he has lost patience with the pace of negotiations. And he’s fine with the outcome
of very high U.S. tariffs. That’s one thing everyone
has to understand. The President doesn’t think,
oh, I’ll pressure the Chinese and they’ll automatically give in. He thinks, I’ll pressure
them and they’ll give in or I’ll get to keep the tariffs and the trade deficit will fall. Both are good for me. We’re doing very nicely with China. But I like it the way it is now because we’re taking in billions
and billions of dollars and we’re giving some of that
money to farmers and others. Now that President Trump is on the cusp of signing a phase one deal, will his willingness to
use tariffs really lead to the fundamental economic changes he is seeking from China? If you wanna be a good negotiator some element of
unpredictability is useful, but I think here we’ve gotten to the point where we’re so unpredictable
that other countries are kinda throwing up their hands and trying to decide is it even really, is it even worth doing a
deal with the United States because we don’t even know if the United States is
gonna stick to the deal. I mean, I think you have to remember that two or three years ago we were being told that the U.S. had very little leverage in trade negotiations and
there really wasn’t a lot we could do to get other countries
to accommodate our concern. The reality of it is is
that countries understand that this is the biggest
economy in the world, it’s a great market, it’s an open market, and I think people are
always gonna be interested in making trade with the United States. It’s fair to say that tariffs brought the Chinese to the table, but what have we gotten out of it? And this gets back to not
so much the tool of tariffs but the strategy. If we don’t know our own goals, it’s very hard to have a win at the end.

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