The Trump Economy and China's Link

President Trump described trade talks with the Chinese president, Xi Jinping, as amazing, stating that disputes over the supply of rare earth minerals had been settled. While Xi Jinping made no official statement, he did state the trade teams had reached a basic consensus.

According to China’s commerce ministry, the agreement included a ten percentage-point reduction in the so-called “fentanyl tariff” imposed by Trump on Chinese goods, as well as reciprocal measures by Beijing to suspend export controls. The tariff linked to fentanyl will drop from 20% to 10%, thereby reducing overall tariffs from 57% to 47%. Any drop in tariffs is usually a good thing.

The Chinese leader agreed to work “very hard” to prevent the production of fentanyl, a synthetic opioid that has caused a surge of deaths among Americans. This is a noble gesture, however, can one really believe it? The War on Drugs is basically unwinnable. In addition, China also said it would lift restrictions on rare earth exports to the US and purchase our soybeans one again. As I reported previously, China had switched to buying soybeans from Argentina, the world’s largest producer, in retaliation for tariffs.

The rare earth minerals agreement would last one year and be negotiated annually with the expectation that it would be renewed on a regular basis. I would have preferred to see a longer-term agreement, or better yet, an agreement that would have kept both governments out of it completely. Business deals, for the most part, should be void of government interference. Either way, though, this is a positive. The US has few rare earth minerals, which are required for many renewable energy sources, while China, by far, has the largest known supply.

“All of the rare earth has been settled,” Trump said. “And that’s for the world, worldwide, you could say this was a worldwide situation, not just a US situation. There is no roadblock at all on rare earth. That will hopefully disappear from our vocabulary for a little while.” Only time will tell.

The US president said they had agreed to work together on Ukraine, acknowledging that China buys a lot of Russian oil. However, that topic was not discussed in any detail. Another issue, not discussed, was Taiwan – the world’s semiconductor giant. Both men ignored a question about the island nation, amid concern in Taiwan that Trump may be willing to make concessions to Xi, who has vowed to “reunify” it.

Likening the US-China relationship to an ocean-going vessel, Xi said the countries should “stay on the right course” and “be partners and friends”. Xi stated he and Trump “don’t always see eye to eye with each other”, but added it was “normal for world’s two biggest economies to have frictions now and then”.

In a worldwide economy, with countries inter-dependent upon each other, we should always strive to keep business relationships wide open at all times, even with those often perceived as foes. When multiple countries benefit economically from agreements, hostilities and the controversy of immigration become far less important and divisive.

Source used: The Guardian