Markets are surging.
Optimism is in the air.
Trump said he’ll delay launching new tariffs on China...
and that a trade deal could be close.
But will the Chinese Communist Party keep its promises?
Welcome back to China Uncensored.
I’m Chris Chappell.
Optimism is in the air.
On Sunday,
President Donald Trump made an announcement
that could start to scale back the US-China trade war.
Trump said...well, tweeted,
“I will be delaying the U.S. increase in tariffs
now scheduled for March 1.”
Back in early December,
Trump gave China 90 days to make concessions
on issues like unfair trade practices
and intellectual property theft.
And if no deal could be reached,
the US would hit China with a new round of tariffs.
Those tariffs would affect 200 billion dollars of Chinese goods.
The tariffs are currently at 10 percent,
but would go up to 25 percent
if no deal is reached by March 1.
Except now,
Trump has extended that deadline.
Adding that,
“Assuming both sides make additional progress,
we will be planning a Summit for President Xi and myself,
at Mar-a-Lago, to conclude an agreement.”
So they’re heading to Trump’s golf estate in Florida.
I mean, any excuse to get out of Washington.
Or maybe it’s because Florida is the best place
for Xi Jinping to experience American culture.
I would know.
I was in Florida two years ago for the last meeting.
Or maybe Trump just extended the trade agreement deadline
while he’s meeting with North Korean leader
Kim Jong-un this week.
After all, the Chinese regime wouldn’t want to
risk the trade agreement by interfering with that.
Regardless, Xi Jinping is extremely happy
that Trump has agreed to extend the trade talks.
I believe we have footage of his reaction.
And the stock market was happy, too.
The Dow Jones ticked higher.
And former commerce secretary Carlos Gutierrez
struck a guardedly optimistic note.
“I hope this is for real.
I mean the marketplace needs it,
the world economy needs it.
I can’t think of a better piece of news for 2019
that the US-China trade war is beginning to tone down.”
Even legendary investor Warren Buffet
skipped his usual Dairy Queen breakfast
to hop over to CNBC studios
and weigh in on the news.
“Negotiations are tough,
this is a big deal to both countries,
and to some extent you’re playing a game of chicken.
”
No idea who was the first to blink, though,
since neither Washington nor Beijing
provided specific details on who made what concessions.
On Friday, Treasury Secretary Steve Mnuchin—
who’s sitting right here—
explained that, well, it’s complicated.
“There’s hundreds of issues that we’re dealing with —
everything from financial services to currency,
to forced technology transfer, to aircraft,
to express shipping, to different industries.”
We don’t have any details yet on
every single one of those hundreds of issues.
But according to this Bloomberg report,
Chinese officials said they would buy
“an additional 30 billion dollars a year
of U.S. agricultural products
including soybeans, corn and wheat.”
Now according to Bloomberg’s sources,
those extra purchases would be
on top of pre trade war levels.
In 2017,
China imported a total of $24.2 billion
in American agricultural products.
Last year, when the trade war started,
that slumped to 16 billion.
Now if the Bloomberg report is true,
it means China promised to buy
more than twice as much in agricultural products
as before the trade war started.
That’s absolutely huge!
Huge...ly doubtful.
Or, as Forbes contributor Kenneth Rapoza put it
“there is no way China is importing
30 billion dollars more in US farm goods”.
That is, unless one of two things happen.
One—China plans “to ram food down the throats of its citizens.”
Or two—China “plans to build more silos to store grain
(which is already rotting in Chinese silos).”
In other words, there is simply not enough
market demand in China
for all that extra food.
Get ready kids, we’re going to do some math.
This table shows China’s agricultural imports from the US.
The biggest US import is oilseed crops—
which is mostly soybeans.
In 2017,
China imported 13 billion dollars worth from the US.
So to make good on its promise to import 30 billion more,
Chinese leaders would have to, say,
force people start eating four times as much American tofu.
Or wear 25 times as much animal hide.
Or some weird vegan-carnivore combo of the two.
But fundamentally,
the problem is that there’s not enough demand
in the Chinese market for 30 billion dollars more
in US agricultural products.
So the only way for this to work
is for China’s central government
to step in and control the market—
which is the very type of economic interference
that the US is trying to get them to stop.
Of course, there’s a third option:
Make a promise, and then break it.
According to economist Arlan Suderman,
“China will say what needs to be said to get a deal.”
...suggesting that Chinese leaders will promise anything,
no matter how unrealistic,
just to buy a bit of time,
with no real intention of actually following through.
Already there’s signs the Chinese side
might not follow through on its end of
whatever bargain gets made.
On Monday,
Chinese state run media Xinhua suggested
they might go back on the deal,
saying that “the emergence of new uncertainty
cannot be ruled out.”
Uncertainty like, Xi Jinping had his fingers
crossed behind his back the whole time.
Maybe that’s why,
according to multiple insiders,
one of the key sticking points in the trade talks
is a mechanism to force Chinese authorities
to keep their word.
Both Reuters and Associated Press reported
that American officials have been pressing hard
for a strong enforcement mechanism
with penalties if the Chinese regime
fails to keep its promises.
I’m imagining the penalties will be things like,
China is grounded from trading for a month,
or they’re no longer allowed to go to trade prom.
Ok, it will actually be something
like the US will resume tariffs.
And somehow I don’t think the Chinese side
is going to be enthusiastic about that one.
That may be what U.S. Trade Representative
Robert Lighthizer was referring to...
when he told reporters at the White House that
“we have a few very,
very big hurdles that we still have to face”
before the deal is sealed.
After all, it wouldn’t exactly be the first time
the Chinese regime has overpromised and underdelivered.
Look no further than all the promises they made
when they joined the World Trade Organization in 2001.
They’re still not living up to their commitments—
like respecting intellectual property,
ending state subsidies in key exports,
and opening up their markets fairly to foreign companies.
So when you’re dealing with a regime
that’s broken commitments on trade
again and again for nearly two decades,
do you really expect them to suddenly change?
Perhaps that’s why—
after striking an optimistic note with Sunday’s tweets—
Trump sounded a bit more guarded on Monday
when talking about signing the trade deal.
“That could happen fairly soon,
or it might not happen at all.
OK?
Might not happen at all,
but I think it's going to happen
and it could happen fairly soon.”
So what do you think of the trade deal?
Will the Chinese regime keep its word?
Leave your comments below.
And while you’re still here,
it’s time for me to answer another question
from a fan who supports China Uncensored
with a dollar or more per episode—
through the crowdfunding website Patreon.
David Michael White asks:
“Matt, which part of Sun Tzu's Art of War
has been the most helpful for your life so far?”
Ugh, a question for my producer Matt.
Matt, what part of the Art of War
has been most helpful in your life?
The section on using spies.
Spies must be used to infiltrate any organization.
Even China Uncensored.
Thanks for your question, David.
Uh, thanks for watching China Uncensored.
I’m Chris Chappell.
See you next time?