As expected, Donald Trump is hailing this as a huge triumph over China.
In reality, it is only a small improvement in trade relations with China that fundamentally preserves the global free trade status quo.
“WASHINGTON — President Trump signed an initial trade deal with China on Wednesday, bringing the first chapter of a protracted and economically damaging fight with one of the world’s largest economies to a close.
The pact is intended to open Chinese markets to more American companies, increase farm and energy exports and provide greater protection for American technology and trade secrets. China has committed to purchasing an additional $200 billion worth of American goods and services by 2021 and is expected to ease some of the tariffs it has placed American products.
But the agreement preserves the bulk of tariffs that Mr. Trump has placed on $360 billion worth of Chinese goods, and it maintains the threat of additional punishment if Beijing does not live up to the terms of the deal. …”
China has agreed to buy $200 billion more agricultural products, manufactured goods, energy and services over two years and Trump can reduce his tariffs before the 2020 election which Midwestern farmers have complained about, declare victory in his trade war and claim he has made progress on reducing the trade deficit, but ultimately it does little to change the status quo. This is not going to reverse the last 20 years of staggering trade deficits.
How has Trump’s slightly revised and rebranded trade deal with South Korea played out? The original free trade deal with South Korea was negotiated by George W. Bush in 2007 and went into force when Barack Obama was president in 2012. The first thing that Obama did after losing the 2010 midterm elections in the great Tea Party uprising was to go to South Korea to work on that trade agreement. Trump bitched about it and preserved it.
U.S. Trade Deficit With South Korea (In Millions)
The deal goes into effect in March 2012.
Donald Trump becomes president in 2017. There is going to be so much winning that your head is going to spin. He promises you will be tired of winning.
Initially, the trade deficit with South Korea declined after Trump became president. He denounced the South Korea free trade agreement as a horrible deal. He said “we’re getting destroyed in Korea.” In September 2018, Trump signed his new renegotiated and rebranded Trump free trade deal with South Korea.
2019 (Without December): -19,261.5
Source: U.S. Census Bureau
A year later, the trade deficit with South Korea has increased over what it was before Trump renegotiated the free trade deal. In 2018, the trade deficit with China under Trump swole to $419 billion dollars, which was its highest level ever. Similarly, illegal immigration to the United States more than doubled in FY 2019 although it has come down since then. George W. Bush, Barack Obama and Donald Trump produced the same result with South Korea.
Is it going to be any different with China this time? How about NAFTA 2.0 with Mexico and Canada? I doubt it.