By Scott Ruesterholz – Townhall
Even as Democrats try to undermine President Trump on the world stage with their partisan impeachment circus, he continues to forge ahead, signing a truly historic “Phase One” trade deal with China on Wednesday. This deal serves as a total validation of Trump’s tariff-oriented trade strategy, will provide a material boost to the US economy in 2020-2021, and could lay the groundwork for a smarter relationship with China over the coming decade.
For two years, Democrats and Chamber of Commerce Republicans told us Trump would make no progress confronting China with tariffs. They would crush the US economy, and the US was not strong enough to do battle with the so-called “long term thinkers” in Beijing. It’s rather fitting then that the same day we signed Phase One, it was announced core input prices rose at the slowest pace since 2016, so much for tariff-related inflation! Prices of tariffs goods like furniture and appliances are rising slower than overall inflation. China has paid for these tariffs; their exports to the US have fallen by over 20%, squeezing their economy, and forcing them to reach a deal.
The lopsided nature of this deal speaks to America’s incredible leverage in the talks because China could not afford to lose access to our market while we can and have been sourcing imports from elsewhere. China has agreed to substantive improvements in its intellectual property laws, shifting legal burdens and processes more akin to America’s system, increasing punishments for violations, and making concrete pledges to stop technology transfers. China also agreed to enhanced protection for pharmaceuticals and to level the playing field for financial companies.
Most remarkably, China promised to buy $200 billion more American products than in 2017, which would be a 50+% jump (about $75 billion in 2020 and $125 billion in 2021). These purchases include $78 billion of manufactured goods, $32 billion of agriculture, $52 billion of energy, and $38 billion of services. These purchases represent gigantic increases that some US producers may actually struggle to meet, particularly in energy. Others, like aircraft orders, will likely be filled and delivered subsequent to 2021. Even if, to be conservative, only half of these purchases are met with new American production in 2020, that would increase GDP by at least 0.25%.
Ever since foolishly permitting China’s entrance into the WTO, American Presidents have pretended Communist China was a “market economy” despite its totalitarian nature and central planning structure. Trump is dealing with China that exists, not the one that we wished existed. Chinese firms largely act at the behest of President Xi’s government. Rules alone will not lead to equitable treatment. When faced with a government-commanded economy, we must ensure that the government commits to buy our products. China has now done that.
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