U.S. President Donald Trump speaks during a trade meeting with Liu He, China’s vice premier and director of the central leading group of the Chinese Communist Party, not pictured, in the Oval Office of the White House in Washington, D.C., U.S. (Photographer: Al Drago/Bloomberg)

History Could Doom U.S.-China Trade Deal

(Bloomberg Opinion) -- Trade talks between the U.S. and China seem to be hurtling toward a predictable conclusion -- the signing of a shallow deal that doesn’t solve the real issues dividing the world’s two largest economies. The coup de grace will likely come later this month in another high-profile summit between presidents Donald Trump and Xi Jinping.

It’s time to admit the “comprehensive” pact Trump promised never really had a chance to come to fruition, precisely because of the way he chose to pursue it. What’s worse, in his eagerness to tout any deal as a bigger and more transformative triumph than it’s likely to be, he may well ensure it fails.

From the beginning, Trump’s tariff strategy not only displayed a fundamental misunderstanding of the Chinese economy and its problems, it was designed to entrench resistance in China. It’s all too easy for outsiders to assume the People’s Republic has no politics, especially after watching China’s rubberstamp National People’s Congress go through its annual motions in Beijing this week. Nevertheless, the Chinese Communist Party has its internal factional struggles and ideological agenda, as well as an image to uphold with the public, just like any other political party.

The fact that Xi now thoroughly dominates the government also puts pressure on him to score successes and maintain a strong economic performance, since there’s no longer anyone else to blame. That suggests he might be eager to end the trade war, especially as the Chinese economy slows down. While he does seem willing to give Trump enough to get a deal done, however, surrendering too much would be more dangerous for Xi politically than doing no deal at all.

The reason is rooted in history, or at least the CCP version of it. A core element of the messaging the party uses to justify its rule is that it will right the perceived wrongs of the past. Beginning in the mid-1800s, Great Britain, France, the U.S. and others used force or the threat of force against a temporarily weakened China to extract pieces of territory, economic concessions and other demeaning violations of Chinese sovereignty through a series of “unequal” treaties. That’s how the British got Hong Kong and the Japanese Taiwan.

Much of the purpose was to pry open a Chinese market that had been tightly restricted by the ruling Qing Dynasty. The CCP now argues that -- thanks to its skillful rule since the founding of the People’s Republic in 1949 -- China is strong again and will avenge these past humiliations, reassuming its proper place at the center of the world economy.

The state propaganda machine keeps the humiliation of China’s surrender to “gunboat diplomacy” fresh in the public mind. In response to U.S. Vice President Mike Pence’s speech late last year on China policy, for instance, a commentary in the party-owned Global Times was quick to remind readers that “the U.S. had been one of the perpetrators of the indignities and exploitation that China suffered during the ‘Century of Humiliation.’”

This narrative severely constrains Xi’s flexibility. Whether the issue is China’s claims in the South China Sea, its disputed border with India, or the legal case against Huawei Technologies Co. Ltd.’s chief financial officer, the government simply cannot be seen at home as kowtowing to bullying by foreigners.

Trump’s strategy -- aiming tariffs, if not cannon, at the Middle Kingdom -- willfully ignored this history and its role in current Chinese politics. And several of Washington’s demands and threats verge on gunboat-style arrogance -- for instance, the U.S. proposal that it be allowed to reimpose tariffs if it decides China is reneging on its commitments, while Beijing would be forbidden to retaliate. The chances of Xi accepting such “unequal” conditions are virtually nil.

The problem is that Trump’s tariffs have hurt the U.S. economy enough, and have been such a source of uncertainty for investors, that he can’t simply hold out for a better deal. Already in 2020 campaign mode and worried about declines in the stock market, Trump is reportedly pushing to wrap up negotiations quickly in hopes of sparking a rally.

Those same pressures -- and criticism from Democrats of any weak deal -- will undoubtedly encourage Trump to trumpet his accomplishment as loudly as possible. That’s precisely the wrong approach to take with China. Xi will need to sell the agreement at home by emphasizing how little he’s given up, or at least as the sort of “win-win” solution he so often touts. Having Trump contradict him publicly and persistently will only feed the narrative that China’s been humiliated again. That will encourage China to assert its newly earned clout in future, on trade as well as other issues, in ways that are sure to inflame tensions.

The result of all this is likely to be a deal that will perpetuate conflict between the U.S. and China rather than resolve it. Sadly, the same political forces that are pressing the two sides towards a pact of dubious value will also fuel continued confrontation.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Michael Schuman, who is based in Beijing, is the author of "The Miracle: The Epic Story of Asia's Quest for Wealth" and "Confucius and the World He Created."

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