China on Tuesday praised the U.S. decision to drop Beijing from a list of governments accused of manipulating the value of their currencies to gain an unfair advantage in trade.
The action by the Trump administration was seen as a major concession to the Chinese government as senior Chinese officials arrived in Washington to sign an interim trade agreement with President Donald Trump on Wednesday.
As part of the deal, China has agreed to boost its U.S. goods imports by $200 billion over two years, including larger purchases of soybeans and other farm goods expected to reach $40 billion a year.
The situation
The Treasury Department's currency report, which was released Monday, provided its first public analysis of China’s currency practices since it designated China a manipulator in August at the direction of the president.
The report noted that China — which Trump had accused of weakening its currency, the yuan, to make its goods cheaper to sell overseas — had made important commitments regarding the yuan as part of the new trade agreement and that its value had appreciated since September.
“China has never been a currency manipulator. The latest conclusion of the U.S. side is in line with the facts and the consensus of the international community,” said China's Foreign Ministry spokesman Geng Shuang.
Treasury Secretary Steven Mnuchin said Beijing had made “enforceable commitments to refrain from competitive devaluation.”
What it means
As part of the trade deal that Trump plans to sign at the White House on Wednesday, China and the United States have agreed to avoid devaluing their currencies to achieve a competitive advantage for their exports.
The trade pact is expected to include an enforcement mechanism, which the Office of the U.S. Trade Representative said would ensure that China could not use its currency practices to compete unfairly against American exporters.
Trump has long been critical of China’s currency practices, arguing that Beijing weakens the yuan to make Chinese exports cheaper in the United States.
Previously
In agreeing to the deal last month, Trump reduced tariffs he had placed on $360 billion of Chinese goods and opted against taxing another $160 billion of imports. China agreed to enforce stronger protections for American intellectual property, open its markets to U.S. financial institutions and commit to greater transparency surrounding the management of its currency.
What’s in the deal
The trade deal will include pledges by China to buy $200 billion of U.S. goods over a two-year period in four industries. The target for manufactured goods purchases will be the largest, worth about $75 billion. China will also promise to buy $50 billion of energy, $40 billion in agriculture and $35 billion to $40 billion in services, according to reports.
Key details about the agreement remain murky, the text remains under wraps and more complicated matters, including China’s financial support for companies that compete with U.S. firms, have been pushed until after the 2020 election.
At a rally last week in Toledo, Ohio, Trump steered clear of specifics about the trade agreement, focusing on the promise that it will be enforced with the threat of more tariffs and the commitment he received from China to increase its purchases of U.S. farm products to $50 billion a year — nearly double what it bought at the 2012 peak.
The initial trade agreement is expected to help cool tensions between the world’s two largest economies but leaves many of the biggest issues unresolved.
Political stakes
The agreement provides Trump with a policy win to hail, but it also deprives him of a useful foil to rail against. China-bashing is a well-worn tradition for Republicans and Democrats in election years. Former Presidents Bill Clinton and Barack Obama criticized their predecessors for coddling China despite its human rights abuses and unfair trade practices during their campaigns in 1992 and 2008. As the Republican candidate in 2012, Mitt Romney assailed Obama for allowing China’s theft of American intellectual property to flourish under his watch.
Trump has made being tough on China one of his hallmarks and has spent much of his first term assailing it as an enemy and threatening to tax all of its imports. But polling that showed his tariffs were wearing thin on his base and a desire to score a policy victory ahead of the election spurred him to strike an interim deal.
Michael Pillsbury, a China scholar at the Hudson Institute who advises Trump, said Trump’s campaign advisers have realized the president’s supporters are less concerned about China’s record of human rights abuses or fears that it is an existential threat and more interested in having greater access to its market.
He said Trump appears to be shifting his tone on China away from the caustic rhetoric used by Stephen K. Bannon, his former chief strategist, in favor of an argument that shows how the president succeeded in “opening up” China.
“The concern of the base about China is not the demonization of China; the concern is the ripped-off jobs and lost trade opportunities, the money part of it,” said Pillsbury.
Support for the deal
Some Trump supporters said the president took on China and scored a major win.
“Instead of giving all the money to China, now we’re going to get some of it back,” said Kim Lewis, 65, a corn and soybean farmer from Jamestown, Indiana, who drove four hours to see Trump’s speech. “He had the guts to stand up to these other countries.”
The optimism surrounding the outcome of the negotiations reflects the deep trust that Trump’s supporters have in a president who promised to stop China from “ripping off” the U.S. and has declared victory in rewriting the terms of trade.
Trump’s public selling of the deal, along with his optimistic views about the U.S. economy, have transcended any downside of his economic policies. Support for Trump and his trade deal remain strong in places such as Ohio, where economic growth and manufacturing employment shows signs of slowing.
What critics say
Critics of the deal have said it is unrealistic that China will ramp up its farm purchases so quickly. And they argue that Trump chose political expediency by settling for an interim agreement that would calm markets amid his reelection campaign but do little to resolve the administration’s biggest concerns about China’s unfair economic practices.
Democrats have largely struggled to settle on a forceful critique of Trump’s China strategy, accusing him of settling for a weak deal and warning that China may ultimately ignore the agreement.
Still, supporters of the president appear ready to blame China, rather than Trump, if the deal does not hold.
What's next
President Donald Trump will highlight his policies on trade and domestic energy in a speech to U.S. farmers next week, the White House announced Monday.
Trump is scheduled to address the American Farm Bureau Federation's convention on Jan. 19 in Austin, Texas. It will be his third appearance at the annual gathering.
Trump is also expected to discuss an updated North American trade agreement that the administration says will be a boon to U.S. farmers.
— This report was compiled by ArLuther Lee, The Atlanta Journal-Constitution
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