Trump’s China Trade Hawks Just Had a Pretty Good Week

(Bloomberg) --

The race is on to interpret — and spin — what President Donald Trump’s “substantial phase one” deal with China means for the U.S., China and the global economy. Which is hard, given it’s not yet a done deal and the substance is yet to be written, as Trump himself conceded.

What you see depends on the lens you look through. China wants more talks to hammer out the details. Longtime trade experts see an incomplete deal missing the big issues. But view it like those China hawks advocating a steady decoupling of the world’s two largest economies and you just had a pretty good week.

Why? Because while Trump’s limited deal may have seized the headlines and soothed financial markets, the past week has both seen an escalation in the technological and culture wars and locked in a swathe of tariffs.

The blacklisting last week of eight Chinese companies took the U.S.-China tech war into the new realm of artificial intelligence. Surveillance company Hikvision was the one mentioned most. But the potentially more important company banned for alleged ties to the crackdown on Muslim minorities in Xinjiang was SenseTime, the world’s most valuable AI startup. The listing didn’t just cut off business relationships, it caused MIT to announce a review of its research partnership with the company. Or, exactly the sort of move national security hawks, who see any engagement with China as a vulnerability, clamor for.

Likewise, the uproar over the NBA’s dependence on the China market and the league’s handling of Chinese anger over a Houston Rockets executive’s brief social media backing for protests in Hong Kong has fed a broader existential conversation over whether it is even moral to do business with Communist China.

Add to that a truce that allows you to keep in place tariffs on some $360 billion in imports from China — taxes already causing supply chains to shift out of your great economic rival — and it’s like being a teen-age hawk whose parents just brought in Kanye and Taylor Swift for your birthday party and threw you the keys to a new Range Rover.

Moreover, with its promise of great farm riches, the pact being promised has likely quieted at least temporarily one big bloc of skeptics and given Trump something to take on the stump. So your parents just gave you a great big shiny new political flak jacket as well.

Of course, all that will have costs and lead to its own hangover. Tariffs will drag on the economy. Even within the national security world there are those who see tech disengagement as likely to hurt America’s capacity to innovate. The NBA and others, meanwhile, will continue to want to do business with China. As will Trump. But for now, the China hawks — as they will quietly tell you — have reasons to smile. They think they’re winning. 

Charting the Trade War

Economists thought that the changing trade landscape of the 1990s didn’t figure much in rising inequality. Paul Krugman revisits their miscalculations — and his own — in this Bloomberg Opinion column.

Today’s Must Reads

• China’s slump | Exports and imports shrank more than expected as existing U.S. tariffs and the slowdown in global trade combined to hurt demand.
• Big Brexit week | Boris Johnson’s attempt to secure a Brexit deal ran into trouble after the EU warned the talks were still a long way from a breakthrough.
• Airbus sanctions | The WTO authorized the U.S. to impose tariffs on about $7.5 billion worth of European exports annually in retaliation for illegal government aid to Airbus.
• Play ball | Tencent Holdings live-streamed two NBA games, even as the nation’s top broadcaster shuns the league because of a controversy around Hong Kong’s pro-democracy movement.
• Strengthening ties | The leaders of China and India agreed to set up a mechanism to discuss trade during two days of informal talks in southern India.

Economic Analysis

• Coming up | Asia’s week ahead features China GDP data and a Singapore interest rate decision.
• Worst is over | India's elusive economic recovery is likely around the corner.

Coming Up

• Oct. 15: India trade balance
• Oct. 21: Japan and South Korea trade data

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Brian SwintZoe Schneeweiss

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