When President Trump announced on the campaign trail that China was "raping" the U.S. and stealing American dollars, many expected that he would drop the hammer on trade. In particular, Trump had threatened to increase tariffs on Chinese imports by as much as 45 percent, which would significantly drive up costs for some U.S. businesses that manufacture in the country.
That all changed late last week, when the Trump administration announced a broad, albeit highly specific, new trade deal with China that seemed to broadcast a reversal of some of his more invective proposals.
The White House outlined just 10 measures aimed at improving the trade relationship between the U.S. and China and reducing the U.S. trade deficit. It also nodded to the Chinese president's plans to invest up to $1 trillion in trade infrastructure projects across the world, from Laos to Pakistan and Hungary, as part of the "One Belt, One Road" project. Xi Jinping announced further details this week.
Naturally, this news is welcome to many entrepreneurs who use Chinese factories to manufacture their products or sell within the region. They see the step as a thawing of previously icy relations between the two world powers.
"After being locked out of the world's largest market for 13 years, we strongly welcome the announcement that an agreement has been made to restore U.S. beef exports to China," said Craig Uden, the president of the National Cattlemen's Beef Association, in a recent statement. (American beef imports had previously been outlawed by China following a mad cow disease outbreak in 2003.)
The latest deal pairs with an overall lightening of tensions on trade--particularly regarding the North American Free Trade Agreement. In recent weeks, Trump had expressed a desire to negotiate between key trading partners Canada and Mexico, rather than throw out NAFTA entirely, which he also threatened on the campaign trail.
"The saber rattling is stopping," says Frederick Crosby, the chief revenue officer and head of marketing at Veem, a financial services startup based in San Francisco that helps small businesses send payments overseas. "The threat that we're going to be charged more expenses, that there will be more complexity [with increased tariffs,] all of that is diminishing," adds Crosby, whose business has been growing sales by a factor of 10 annually. Prior to joining Veem, Crosby served as a director of cross-border trade for eBay and PayPal, and was the chief revenue officer at Western Union digital.
Of course, the deal itself is modest. Under the new terms, China must soon begin accepting U.S. beef imports, while American payment services firms will be allowed entry to the Chinese market. In return, the U.S. must begin accepting cooked poultry exports from China, and China will soon be able to purchase U.S. liquefied natural gas.
While concessions on both sides are generally perceived as positive, analysts point out that the pact fails to address other pressing matters, such as the dumping of steel and aluminum in the U.S. market. Others hoped that the deal would tackle issues such as industrial overcapacity and forced technology transfer.
"All progress on market access is well-received by the business community," noted James Zimmerman, the former chairman of the American Chamber of Commerce in Beijing, in an interview with CNBC. "However, many of these issues have been part of ongoing bilateral discussions for years and many more barriers need to be resolved." To his point, the Obama administration had brought a case against Beijing to the World Trade Organization, to allow U.S. credit card companies access to the Chinese market, back in 2012. It ultimately won, though regulation continued to prevent giants like Visa and MasterCard from operating there. Meanwhile, Joerg Wuttke, president of the European Chamber of Commerce in China, characterized the deals as "piecemeal," and not signifying a broader opening of the Chinese market.
Similarly, Dean Baker, the co-director of the nonpartisan Center for Economic and Policy Research, sees the new rules as having little to no effect in the long term. "It's not going to have a big impact on the trade deficit," says Baker. Although beef producers certainly have cause to celebrate, such exports are expected to reach only a few billion U.S. dollars annually. That's a drop in the bucket compared with the more than $500 billion deficit, says Baker.
Even so, others remain convinced that the new trade deals are a sign of a kinder, gentler Trump. "What Trump is doing is separating his campaign rhetoric from business and geopolitical reality," says Fred Crosetto, the founder and chief executive of Ammex, a disposable glove distributor based in Kent, Washington. "He knows that to get something with China, one has to give something."