President Donald Trump will not press China in commerce as he did with Europe.
Two days after the EU agreed with a trade agreement with the White House that some of the block’s national leaders consider a capitulation, Trump’s negotiators left the talks with Chinese President Xi Jinping’s team in Sweden without any advance.
Following a series of business agreements celebrated by the administration, China and the US is expected to continue negotiations. But the lack of significant progress was a striking reminder of China’s power, what is at stake in facing Trump and how efforts to reshape global trade will be incomplete without a deal with Beijing.
Instead of another victory, Trump’s negotiators will propose to extend the break in the historical increases of mutual tariffs, which would otherwise enter into force on August 12. The president has a choice: approve more time for more negotiations, which would please Beijing, or relive a disastrous trade war between superpowers.
It’s not quite a choice.
“Let’s just introduce you to the facts, and then it will decide,” said Treasury Secretary Scott Bessent, who, together with US commercial representative Jamieson Greer, led the US delegation in Stockholm to CNBC on Tuesday.
No one denies that Trump is on the rise when it comes to trade.
He can rightly claim significant political victories with a series of Framework Agreements with the EU, the United Kingdom, Japan, Indonesia and the Philippines that favor the United States by imposing unilateral tariffs.
Trump’s bet that other commercial nations and blocks would have no choice but, in his words, to pay more for access to the powerful US market, it was worth it. And in his business agreements, he managed to open some previously closed markets to US manufacturers.
Trump has long considered Europeans to take advantage of American power. He has fulfilled his promise to substantially reinvent the transatlantic relationship, ensuring a 15% rate on EU exports and forcing NATO members to agree with sharp increases in defense spending by 2035. Their intuition that allies are so dependent on the US security that would give in to commerce was correct.
Trump is also disrespecting the common sense of most economy experts and fragmenting the global free trade system and low tariffs by imposing some of the highest rates since the 1930s.
And so far, the global economic disaster that many predicted has not materialized.
Even more remarkable, he acted to impose a personal obsession that has been nourishing since the 1980s: tariffs.
But this can just be the interval. Many of the expected consequences of this new US radical trade policy have not yet been realized, including higher prices for US consumers, which could quickly displease voters about the president’s approach. Goldman Sachs estimates that it can take up to eight months for price increases to appear. Other consequences of Trump’s commercial adventure will also take time to become obvious.
This is not preventing government triumphalism.
“No one moved as fast as the world moved over Donald Trump. He moved the world in a way that no one could imagine,” Secretary of Commerce Howard Lutnick told CNBC. “He did it in six months; that’s amazing.”
Xi has powerful cards to play against Trump
But China is coming on the way to Trump’s victory.
And the president may have found his opponent to Xi.
He faces none of the restrictions that prevented Europe from entering the trade war – which was afraid of antagonizing Trump and risking his military protection and the need for US support in Ukraine.
And China’s resistance is based on the economy, sovereignty and politics that are essential to the Communist Party regime.
No Chinese leader – especially someone like Xi, who has built their power based on nationalism and restoration of what Beijing considers to be his legitimate dignity and respect – can capitulate before an American president in a commercial negotiation. China’s centralized political structure, unlike the often conflicting EU of 27 nations, also gives it stability.
In addition, there are mango letters that can keep the US economy hostage – including its mastery in the production of rare land used to manufacture smartphones, smart weapons, satellites and aviation engines.
China reacted to Trump’s initial statement of a trade war by blocking the export of vital elements. Since then, the market has reopened, but Trump management continues to complain that Beijing has been taking too long to approve all rare land requests for American companies.
But the fact that the rare lands are an asset to Xi does not go unnoticed to anyone.
For decades, China’s isolated leaders did not understand US policy. This is no longer the case. And it would not be surprising if they had already concluded that if they face Trump, he will retreat.
Challenging China under these circumstances would be a huge bet.
It is not that China wants a trade war or is not harmed by it. Your economy is full of problems.
But his authoritarian system means that Xi can impose more suffering on his people than Trump could risk inflicting the Americans. It was practically the only global commercial power to ignore Bessent’s warning not to retaliate after Trump’s tariff explosion in April.
Bruce Stokes, a visiting senior researcher at German Marshall Fund, argued that Trump’s desire to visit Beijing later this year for a summit with XI can also be crucial.
“It’s not just economy. (Trump) wants to be hard with China, I think this is unquestionable,” said Stokes. “But I think he wants to have the opportunity to go bro in Beijing, both by the image that this goes by and because he believes he is a negotiator capable of closing agreements.”
Stokes added, “Chinese experts with whom they talk about the Chinese believe this type can be manipulated.”
Trump’s zeal for individual negotiations is antithetical to the approach full of Chinese protocols. Chinese negotiators seek to protect their leader, reaching agreements at lower levels. Trump’s team seeks to prepare yours for large photographic sessions that feed their ego of “Art of the Deal”. There is no chance of Xi flying for a meeting with Trump and improvising an agreement, and then praising its negotiation capacity, as Ursula Von Der Leyen did over the weekend.
Bessent told CNBC that there was an extensive “pre-game” planning in Stockholm, starting with 75 Chinese responsible, compared to the 15th of the US delegation. Eventually, the teams were reduced to the essential details involving Bessent, Greer and Chinese vice-minister He Lifeng.
The head of the Treasury insisted that negotiations had “good progress” on US position on a “clumsy” Chinese Chinese system of rare land exports. Deputy Prime Minister He said the negotiations were constructive and that both sides would continue to press for a 90-day extension of the pause in reciprocal tariffs.
But Bessent warned that China rushed to break before Trump pronounced. Of course, presidents make the final decision on foreign policy. But this can be mainly an image issue. Trump needs to be seen as the great leader. But it is also a measure of your chaotic volatility that nothing is certain unless it takes.
Trump’s commercial victory series is wide, but not deep
China’s impermeability to Trump’s trade maneuvers is not the only reason why the government’s rejoicing is premature.
Business agreements are generally complex, reaching thousands of pages after exhausting negotiations between trade lawyers. Superficial framework agreements released by the White House, on the other hand, show that thorny disputes in EU agreements and other commercial competitors have not been resolved. Superficial agreements can easily collapse.
Trump can also slowly react in detail with the imposition of tariffs. And the recriminations that boil in Europe mean that it is not certain that the agreement reached on Sunday in Scotland will survive.
Trump’s business, personal and political life has always existed in a perpetual postponement cycle. Therefore, it is typical that although he is publicizing his series of trade wins now, he has no idea what the future reserves.
It will take time to evaluate how almost certain increases in consumer prices will affect the economy. And the shock of tariffs will take months to be absorbed by supply chains and elaborate purchasing schedules in advance. This explains why Federal Reserve President Jerome Powell is reluctant to reduce interest rates despite Trump’s fury.
Tariffs may not kill economic growth and cause recession, and companies can adapt to the new certainty of 15% and 20% taxes. The highest costs could be shared by consumers, companies and suppliers in a way that relieved part of the impact on voters before next year’s interchange elections.
But while historically high, tariffs are probably not punitive enough to force companies to undertake the extremely expensive process of transferring production to the United States – an ostensible justification for Trump’s trade wars. And Trump won’t be in the oval room forever. CEOs can argue that their successor will likely moderate protectionism, especially if the economy slows down.
Other difficulties also get forward. Canada, unlike the EU, does not seem willing to ask for peace after Prime Minister Mark Carneary gains power with Visceral Antiamericanism. Prolonged commercial conflict would harm canadians more than Americans, due to the relative size of neighbors’ economies. But Carry can make things difficult for Trump.
A sudden outbreak of inflation early next year, perhaps triggered by the president of the Federal Reserve that Trump will name when Powell’s term end, could also undermine the fragile base on which the president’s commercial victories rest.
All of this explains why a real deal with China is so important.
And Beijing knows this, so it is unlikely to give in.
