How the Impeachment Ruckus Changes the Tone of U.S.-China Trade Talks

(Bloomberg) --

How the impeachment inquiry Donald Trump is facing will affect the way he governs for the remaining 15 months of his term in office is the question dominating discussions in Washington. Well, besides daily revelations surrounding a case where, uniquely, the facts are mostly agreed to by both sides and it is only their interpretation that is the cause of vigorous debate.

So how will the impeachment crisis impact the trade war against China and what is arguably the most geopolitically consequential item on the president’s policy plate? There’s plenty of debate to be had on that question as well. And three things to keep in mind:

• The Chinese were frustrated with the difficulties and unpredictability of dealing with Trump long before impeachment was a potential reality. People who have met with Liu He, the vice premier leading the negotiations in Washington again in the next few days, say he has not hidden his diminished expectations in recent weeks. The impeachment case adds just another layer of unpredictability. Especially when Trump wants China to investigate the Bidens as much as he wants a deal. That is not welcome in Beijing.
• Trump’s actual negotiators are doing their best to ignore the growing mess in Washington. Robert Lighthizer, his trade czar, is a veteran of beltway politics. Rebalancing the relationship with China is something he has wanted to tackle for 30 years. And, people close to him say, he remains focused on what he can control and securing a worthy deal with China. In some ways impeachment may only embolden the Trump camp in dealing with China.
• The reality is things were not going well in the talks before any of this started. Since they broke down in May, leading to a summer of tariff acceleration, stop-start negotiations have been focused more on how to resume discussions and avoid escalation than substance. As my colleague Jenny Leonard and I reported on Sunday, the Chinese have been telling American visitors to Beijing that they are now not prepared to address government subsidies at the heart of the economic model that has led to China’s industrial rise over the past three decades. Which is a bit like a groom showing up for a wedding without a ring as far as some in the Trump administration are concerned. And which means impeachment may matter less than what either side is prepared to put on the table. 

Charting the Trade War

U.S. imports from China fell 12.5% in the year through August, while purchases from Mexico — the second-biggest supplier of goods to America — posted the biggest increase. Imports from China declined $43.25 billion from the same period of 2018, while purchases from Mexico rose by 5.5%, or $12.4 billion. Other countries posting a big increase included Vietnam, with a jump of 34% or $10.9 billion — enough to move it from 12th to 7th on the list of America’s suppliers. The top six rankings were unchanged.

Today’s Must Reads

• Smaller deal | Chinese officials are signaling they’re increasingly reluctant to agree to a broad trade deal pursued by the U.S. before negotiations scheduled for later this week.
• Weak Asia exports | Vietnam’s export growth this year may weakened sharply from the prior two years, and Taiwan’s shipments abroad are suffering from global trade tensions.
• Loophole closed | The White House dealt a fresh blow to renewable energy developers by removing an exemption the industry was counting on to weather tariffs on imported panels.
• Ethanol twist | Brazil and the U.S. have been hammering out a deal for ethanol trade for months, and the latest twist in the saga could become a major setback for American farmers.
• Agriculture ache | Cheese from France and Italy, Spanish wines, Scotch whisky and Greek canned peaches are some of the exports whose prices in the U.S. are set to rise because of new tariffs.

Economic Analysis

• Container rates | Tariffs hikes to dull container peak season, rates to stay muted.
• Free spirits | Some $425 million in whiskey tariffs were averted as U.S. targets single malt.

Coming Up

• Oct. 8: Japanese, South Korean, French trade balance
• Oct. 10: German, U.K. trade balance
• Oct. 10-11: U.S.-China talks in Washington

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

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