Trade Negotiations with China are About Trump's Reelection

Trump followed through on his threat to increase tariffs 25% (see "Trump Increases China Tariffs as Trade Deal Hangs in the Balance" by Ana Swanson and Alan Rappeport):

Mr. Trump’s decision to impose 25 percent tariffs on nearly one-third of all Chinese products is the biggest trade action that Mr. Trump has taken so far. The higher tax hits many consumer products that Americans rely on from Beijing, like seafood, luggage and electronics, raising prices for American companies and their customers across a large portion of sectors.

[snip]

The new 25 percent rate went into effect at 12:01 a.m. Friday. But the higher tariffs will hit only products that leave China after that time, not those already in transit. That could provide some additional time for the two sides to reach an agreement. Mr. Trump may also be able to rescind the tariffs once a deal is reached, retroactively reversing the higher rates.

The reporting is oddly conflicted. Stories quote analysts that say a deal is in the offing and then in the next paragraph there is another analyst or former government official asserting that a trade war is now inevitable.

That's why I have steered clear of this topic for the last year. It seems to me almost impossible to divine where this headed.

If it's true, as Nick Beams asserts this morning, that Trump's goal is to upend Chinese industrial policy (a.k.a., Made in China 2025), then a major trade war is inevitable:

These issues have been at the centre of the conflict, which began last May when the Trump administration set out its base position, essentially demanding that China end its efforts to develop hi-tech industries and assume a semi-colonial status with regard to the US.

Shi Yinhong, an adviser to China’s State Council, told the South China Morning Post the US had pressed China to make changes on structural issues such as subsidies for state-owned industries. Beijing it found difficult to accept these demands but did not reject them outright.

“China wanted to offer some smaller concessions, hoping the US would accept,” Shi said. “But Trump would not allow it.”

The newspaper cited an unnamed professor at the Chinese Academy of Sciences, also a senior adviser to the Chinese leadership, who said some of the US demands, especially those on cancelling subsidies, would be “suicidal.”

“It means that China has to give up its development pattern,” he said. “China would rather accept the US raising the tariffs to 25 percent. China will not give up its bottom line just for the sake of reaching a deal.” China could “bear the consequences” and was “prepared for failure.”

My sense is that Trump's goal in these trade negotiations is primarily reelection in 2020. He needs to find a big issue that everyone understands where he can get to the left of the Democrats. He really can't do that anymore on issues of war and peace, as he did in 2016, because he's threatening a hot war in both Iran and Venezuela. Trade with China is a place where he can. Biden already put his foot in his mouth by saying China isn't a peer competitor.