Beijing may have upper hand in Trump’s efforts to restore ‘Gilded Age’ America

(Originally published May 14 in “What in the World“) The seeds of failure for China-U.S. trade negotiations may already be germinating.

Beijing and Washington have given themselves 90 days to reach an agreement to end their trade war. The deal, announced last weekend, lowers the effective tariff on China imports from 145% to 39%. It follows another the previous week between the United States and the United Kingdom that brought the effective tariff on British imports to the U.S. down to 8%.

The U.K.-U.S. trade agreement includes tariff relief for imported British steel and cars on the condition that the U.K. submit to “Section 232 investigations” to determine the impact of those imports on U.S. national security. British officials said their counterparts in Washington had made clear the aim of those investigations would be to reduce Chinese ownership of factories producing these imports or the companies that supply them.

That’s apparently part of what the White House aims to achieve in bilateral trade talks: to isolate China by offering to reduce his reciprocal “Liberation Day” tariffs if trading partners promise to block Chinese imports and Chinese manufacturing investment. Last month, Beijing threatened retaliatory measures on any country that cut such a deal with Trump. So unsurprisingly, Beijing has criticized the U.K. for agreeing to a deal with Washington that targets China.

The evidence so far is that Trump relented on his China tariffs because the pain on U.S. businesses and consumers became too severe—and not because China caved in with concessions. If that’s true, Beijing now has leverage to force Washington to delete the restrictions on Chinese investment in the bilateral deals it’s negotiating. That means re-writing the U.K.-U.S. deal. Or else see the tax Americans pay for Chinese imports return to 145% come August.

While the stock market continues to cheer Trump’s apparent effort to unwind at least some of his taxes on American consumers, Republicans in the House of Representatives are helping Trump undermine Americans’ health and safety. After the Ways and Means Committee released legislation to end subsidies for renewable energy and tax incentives for purchases of electric vehicle, the House Energy and Commerce Committee has drafted legislation to cut Medicaid spending that would save the U.S. government $715 billion over the next decade but leave 8.7 million Americans with no health insurance. Both pieces of legislation are designed as components to “one big, beautiful bill” that Trump has demanded Congress pass to fulfill his campaign agenda.

Noted Berkeley economist and former IMF adviser Barry Eichengreen has added his sage voice to the chorus warning that Trump may have permanently tarnished American exceptionalism. In a new piece, he warns that:

“…recent events tear at the fabric of US economic exceptionalism, and how difficult that fabric will be to mend… A transactional president has revealed the US to be a transactional society, where the highest returns accrue to rent seeking and cronyism, not to initiative and innovation.”