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US-China tensions

Trump falls short on China trade goals, but Biden unlikely to make radical shift

China purchases only 60% of US goods pledged in year-old 'phase one' agreement

Chinese Vice Premier Liu He and U.S. President Donald Trump shake hands at the signing of the "phase one" trade agreement at the White House in January 2020.   © Reuters

WASHINGTON/BEIJING -- It was one of President Donald Trump's signature goals: rebalancing U.S.-China trade. And Trump fell short of his ambitions. But President-elect Joe Biden's trade policy focused on the middle class is not likely to mark a change of course, at least at first.

China has bought less than 60% of the additional American imports it had promised to in the year-old "phase one" trade deal, putting additional pressure on the Biden administration to rethink Trump-era trade policy.

The deal signed by Trump and Chinese Vice Premier Liu He covers seven areas, including protection of intellectual property.

Headlining the accord is a Chinese commitment to expand imports of American goods and services by $200 billion over the two years ending 2021. But from January to November of 2020, "China's year-to-date total imports of covered products from the United States were $86.9 billion, compared with a prorated year-to-date target of $153.8 billion," according to the Washington-based Peterson Institute for International Economics.

In other words, China had purchased only 56% of the goods it was supposed to by November. The new coronavirus, which began its global spread around the time the deal was inked, did not help.

COVID-19 aside, managing trade is a messy affair. American exports of soybeans to China actually grew 58% from a year earlier, but shipments to other countries dropped. The Chinese share of U.S. soybean exports increased 11 percentage points to 53%.

The deal has distorted the free market and raised doubts among American farmers whether it is sustainable.

Biden has said the phase one deal is "failing -- badly," and his campaign has said China "continues its trade abuses and is failing to live up to its commitments." They have criticized Trump's trade policies for burdening American businesses and failing to curb China on industrial subsidies and other structural issues.

Washington halved tariffs on $120 billion in Chinese goods from the previous levels to 7.5% but kept 25% tariffs on $250 billion in goods. As of early January, the U.S. had collected $74.2 billion from tariffs levied on China, official statistics show -- more than double the annual average before the trade war.

Nor has the Chinese goods trade surplus with the U.S. gone down much. It reached $316.9 billion in 2020, shows data from China's General Administration of Customs -- roughly on a par with the record of more than $320 billion, set in 2018.

While China's imports were soft in 2020, the country put up a better fight than the U.S. did against COVID-19. Chinese exports of medical products and electronics to the U.S. jumped that year, especially masks and computers.

The question now is how much policy will change once Biden takes office. And while a shift in strategy is expected, it is not likely to turn the clock back past Trump's.

Biden had also talked about the new strategy in December when introducing House Ways and Means Committee trade lawyer Katherine Tai as his pick for U.S. trade representative.

"Trade will be a critical pillar in our ability to build back better and carry out our foreign policy -- foreign policy for the middle class," the president-elect had explained.

Signs are already emerging that elements of the Trump approach will remain in place. Biden told a New York Times columnist the same month that he would not immediately remove the tariffs.

Katherine Tai, the Biden administration's choice to take over as U.S. trade representative.   © AP

"It's going to be a major priority for me in the opening weeks of my presidency to try to get us back on the same page with our allies," he said.

Biden is all but certain to be labeled soft on China if he lifts the tariffs unconditionally. This indicates that the Biden administration will seek to use the duties as a bargaining chip to extract concessions.

"We face stiffening competition from a growing and ambitious China," Tai said in prepared remarks Tuesday to the National Foreign Trade Council Foundation. "A China whose economy is directed by central planners who are not subject to the pressures of political pluralism, democratic elections or popular opinion."

Mechanisms exist for the U.S. to exempt certain Chinese goods from additional tariffs at the request of American companies if conditions are met. If fully exploited, this framework can enable the Biden administration can take a tough stance on Beijing while limiting the burden on U.S. companies.

"My recommendation to the Biden administration is this," said Gary Hufbauer, nonresident senior fellow at the Peterson Institute: "Be very liberal in granting exclusions to the ... tariffs, and deemphasize the phase one targets for Chinese imports from the U.S. Move away from managed trade and seek areas of commercial cooperation with China."

Meanwhile, the Chinese leadership has pledged to carry out the trade agreement while signaling a wait-and-see approach. Of course "it can change depending on the U.S.'s attitude," said a Communist Party insider knowledgeable about diplomacy.

There appears to be activity among ministerial-level officials that suggest they anticipate new U.S. trade.

The Chinese government said Wednesday that it has named Yu Jianhua, an experienced trade negotiator, as its top trade representative. As a deputy representative, Yu handled talks with U.S. officials after Washington's 2017 launch of a Section 301 investigation into Beijing's handling of intellectual property rights, according to Chinese media.

He has also served as ambassador to the World Trade Organization, among other prominent posts.

Even after the phase one deal was signed, Beijing continued to use soybean imports, a sore spot for Trump, to rattle Washington.

As relations between the two countries frayed over the coronavirus and the crackdown in Hong Kong, Chinese purchases of American soybeans slowed, tumbling between 30% and 90% year over year on a monthly basis from April onward.

Trump, scrambling to win support from the agricultural sector ahead of the November election, continued to pressure Beijing to boost imports up until September. Imports finally increased in October -- but this data was not released until Nov. 25, weeks after election day.

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