Science of Substance and Schedules Disrupts the Art of a U.S.-China Trade Deal

(Bloomberg) --

If what we’re witnessing is the art of a trade deal between the U.S. and China, it’s feeling a little like the process for a Jackson Pollock.

The easiest part, according to U.S. Commerce Secretary Wilbur Ross, should be for both sides to decide on the location for leaders Donald Trump and Xi Jinping to sign phase one of agreement. But U.S. officials signaled in the past  in the past 24 hours that the U.S. locations under consideration — Iowa, Hawaii, maybe even Alaska — have been ruled out while more neutral venues in Europe and Asia are scouted.

The timetable is less clear, too. After speaking optimistically that Trump and Xi should be able to stick to their plan to meet this month to ink the partial deal, and then watching the stock market soar to a record on renewed optimism for both economies, some U.S. officials are now saying the signing summit might slip to December. The “consensus in principle” that China declared last Friday suddenly sounded less than air tight. 

And most importantly, the substance that will wind up on paper is still all over the place. China just said both sides have agreed to roll back tariffs on each other’s goods in phases as they work toward the deal. That sounds like a big U.S. concession, but one that comes with an equally big “if:”

“If China, U.S. reach a phase-one deal, both sides should roll back existing additional tariffs in the same proportion simultaneously based on the content of the agreement, which is an important condition for reaching the agreement,” Ministry of Commerce spokesman Gao Feng said Thursday.

Trump likes what his tariffs on some $360 billion of Chinese imports are doing to redirect supply chains away from China and for the revenue boost that import taxes are giving to a Treasury Department that’s facing a $1 trillion budget deficit. While he may remove the threat of more levies on Dec. 15, he’s unlikely to roll back the existing ones without something of substance in return.

China is trying to make the decision easier for him. Chinese officials this week sentenced three people to maximum punishments for smuggling fentanyl to the U.S., a high-profile crackdown against the illicit flow of opioids that Trump called for as part of the broader trade talks. In another move, China is studying the removal of curbs on U.S. poultry imports, according to Xinhua.

Ross explained one possible reason that it’s not coming together neatly and quickly. “Trade deals are very, very complicated and this one is particularly complicated,” he said in an interview Sunday with Bloomberg Television.

Charting the Trade War

The European Commission lowered its prediction for EU export market growth for this year and next: “Global policy uncertainty is expected to continue weighing on trade in the quarters to come, driven by the ups and downs of the trade conflict between the U.S. and China and the global increase in protectionism as also other countries have ramped up their rhetoric and started introducing new trade barriers themselves.”

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Coming Up

• Nov. 8: China, Germany and France trade balances
• Nov. 12: Trump speaks on trade at the Economic Club of New York

To contact the editor responsible for this story: Zoe Schneeweiss at zschneeweiss@bloomberg.net

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