International business experts believe President Trump and Chinese President Xi Jinping are within reach of a deal ending a yearlong trade war — but they’re skeptical that it will solve the core disputes.
At a minimum, experts believe Trump and Xi are likely to roll back tit-for-tat tariffs initiated by Trump to gain leverage. But they say it’s nearly unthinkable that China would begin respecting intellectual property rights, as doing so could hobble state-owned industries.
An end to tariff battles “would be important for China and important for the U.S.,” said former U.S. Trade Representative Mickey Kantor, who helped lead negotiations in the late 1990s over China’s entry into the World Trade Organization.
“It should be possible” to strike a deal, Kantor said. “China is an economy that’s slowing down some. The imposition of tariffs by the U.S. and the general surroundings of a trade war have not helped the Chinese economy.”
But Kantor said a deal won’t necessarily be a good one.
“Xi Jinping can’t look like he succumbed … China has its own internal politics,” he said. “If the scope of this deal is limited and does not cover significant issues, I would say it would not have a significant impact at all … I’m not so sure what we will get, we wouldn’t get another way.”
In late January, Chinese Vice Premier Liu He visited the White House for talks, and Trump has vague plans to meet with Xi later this year, potentially to ink a pact.
In his State of the Union address, Trump declared that “we are now working on a new trade deal with China. But it must include real, structural change to end unfair trade practices, reduce our chronic trade deficit, and protect American jobs.”
But structural change to protect U.S. intellectual property could weaken major companies in China, such as the telecom giant Huawei, now the world’s largest smartphone maker, which is facing charges in U.S. courts for stealing technology, including from T-Mobile.
The trade deficit, meanwhile, may be papered-over with short-term promises to purchase more U.S. goods — as seen with Liu’s pledge to buy five million metric tons of U.S. soybeans — without permanent readjustment, experts say.
“Other than tech transfer and intellectual property theft, I didn’t see that there was a problem in the first place. Citing the trade imbalance is deeply misguided,” said former Federal Reserve economist Josh Feinman, now chief global economist at Deutsche Asset Management.
Feinman describes himself as cautiously optimistic about a deal.
“Rolling back tariffs that should not have been put in place in the first place is good if it happens,” Feinman said. “If all of that stuff ends up helping solve the real problem, that would be great. It would be worth all the ruckus. If it doesn’t, then I think the ruckus is a whole lot of nothing.”
Tony Roth, chief investment officer of Wilmington Trust Investment Advisors, the investment advisory arm of M&T Bank, said there’s “not likely to be tremendous progress” on intellectual property issues, however.
“What we expect is to see a resolution in the first half of the year that allows tariffs to be removed but not address the IP transfers that are at the heart of the dispute,” Roth said. “It’s easy for the Chinese to say, ‘We are buying a trillion dollars of American goods,’ [and] I think that’s what we’ll get.
“The headline is going to be: significant purchase of goods and a promise to cease IP theft — [but] not enforcement,” Roth predicted.
