After intense two-day negotiations with China in Geneva recently, the United States agreed to postpone its “reciprocal tariff” on China for 90 days, with both sides cutting additional tariffs mostly to 10 per cent. In yet another example of US President Donald Trump taking people by surprise, he declared the climbdown a “historic trade win”.
Trump and his supporters claimed a victory by pointing to the pre-April-2 fentanyl-based tariff of 20 per cent on China that remains, by Beijing agreeing to “suspend or remove the non-tariff countermeasures” introduced against the US since April 2 – presumably including the rare earth export controls that threaten to hamper US military and chip industries – and, in Trump’s words, by China deciding to “open itself up to American business”.
But the world in general has deemed it a serious setback to Trump’s much-trumpeted agenda, so much so that the Wall Street Journal labelled it a “major retreat”, observing “the China deal is more surrender than Trump victory”. The Guardian calls May 12 – the day the joint statement on the Geneva meetings was released – America’s “Capitulation Day”.
However, in achieving a climbdown of this scale without devastatingly denting US credibility and prestige as the world’s sitting superpower, Trump deserves some applause. And he could not have done this without Beijing’s tacit collaboration. After all, China wants its rise to continue peacefully, believing time is on its side.
Of course, prospects remain fraught. The 90-day truce is merely a moratorium and, given Trump’s notorious fluidity, no one can confidently predict what will happen in the meantime and how it will end. Still, the world has breathed a huge sigh of relief, for now. Shipping fees have surged as orders are hastily placed. Capital markets are perhaps the clearest indicator: major stock indices including the Dow Jones Industrial, S&P 500 and Nasdaq Composite have recouped their losses this year.
Former US Treasury secretary Larry Summers said it all when he opined that “it’s President Trump who blinked” while “China didn’t make any consequential or significant change in its policies”. But he went on to say that “sometimes it’s good to blink” – meaning the embarrassment was worth it as long as the US, and indeed the world, economy benefited.
