◎ The Trump administration is complementing the CCP’s delaying tactics with a “phase-by-phase” approach to a trade deal, and is falling into the CCP’s trap.
Between Oct. 1 and Oct. 11, senior Chinese and American officials held the thirteenth round of Sino-U.S. trade talks in Washington D.C. On the second day, United States President Donald Trump met with Chinese vice premier Liu He at the Oval Office and announced that they had “come to a very substantial phase one deal.”
The phase one deal includes:
- China agrees to purchase American farm products totaling $40 billion to $50 billion. U.S. finance secretary Steven Mnuchin said that the $40 billion to $50 billion in farm purchases will be an annual figure over two years.
- The U.S. would not be going ahead with a planned increase in tariffs on $250 billion of Chinese goods from 25 percent to 30 percent on Oct. 15.
- Trump said: “Currency foreign exchange will be covered in entirety. Financial services, I think, will be covered pretty much in its entirety. So the banks and lending institutions — all institutions — are covered.”
- Some unspecified technology transfer agreements.
- U.S. Trade Representative Robert Lighthizer said that Huawei is not part of the phase one agreement.
- U.S. officials told The Wall Street Journal that both sides “made progress on intellectual-property protection and rules to prevent currency manipulation.”
Trump said that the paperwork of the deal should be “done over the next four weeks,” and added that a formal signing with him and Xi Jinping could take place at the Asia Pacific Economic Cooperation (APEC) meetings in Chile in five weeks time.
Trump also said that technology transfer will largely be done in phase two of the trade deal, and “you’ll either have two phases or three phases.”
Trump said, “I think that world peace — you know, there was a lot of friction between the United States and China. And now, it’s a lovefest. That’s a good thing. But that’s good for China and it’s good for us, but it’s good for the world.”
When asked by reporters about Hong Kong and the trade talks, Trump said that the subject was discussed and noted that “great progress has been made by China in Hong Kong.” Trump said, “I actually told the Vice Premier it really has toned down a lot from the initial days of a number of months ago, when I saw a lot of people … We were discussing it, and I think that’s going to take care of itself. I actually think this deal is a great deal for the people of Hong Kong to see what happened. I think this is a very positive thing for Hong Kong … [the protests] really has deescalated a lot from the beginning, and we were discussing that.”
In a short Q&A with the press on his way to board a helicopter, President Trump appeared to be asked if China was going to keep their word, to which he replied in the affirmative and said, “they want to make a deal, they’re going to keep their word.”
The big picture
The latest round of Sino-U.S. trade talks comes amid the backdrop of sharpening rhetoric by senior Trump administration officials over the Chinese Communist Party’s persecution of Uyghur Muslims in Xinjiang (Secretary of State Mike Pompeo said that the “pages of George Orwell’s 1984 are coming to life there”); a raft of legislation and gestures by the U.S. Congress in support of Taiwan and Hong Kong; escalation of violence and the enactment of a colonial-era emergency law in Hong Kong; and growing alarm over the CCP censorship of American companies at the grassroots level.
Our take:
1. From the so-called Sino-U.S. “mini-deal” to Trump essentially repeating CCP talking points (“what’s good for China is good for us and good for the world” sounds suspiciously like the CCP’s “win-win consensus” propaganda rhetoric) in his meeting with Liu He and tacitly approving the CCP’s handling of Hong Kong (we looked at the CCP’s strategies here, here, and here), it appears that the CCP has stolen a march on America in the Sino-U.S. “Battle of Waterloo.” Currently, developments are progressing per the CCP’s ideal scenario that we identified in our Special Report, and the U.S. has even fewer windows of opportunity left open to swing the Battle’s momentum in its favor.
2. By adopting a phase-by-phase approach in pursuing an “epic” or “monumental” trade deal with China, the Trump administration is complementing the CCP’s delaying tactics and is falling into its trap.
3. It is unclear why Trump would believe that the Chinese regime wants “to make a deal” and that “they’re going to keep their word” this time. The CCP lives by “deception, perniciousness, and struggle” (假 惡 鬥), actively engages in “unrestricted warfare” with the U.S., and has a long track record of going back on its word. As former FBI agent W. Cleon Skousen wrote in The Naked Communist, “with Homo-Marxian the signing of fifty-three treaties and subsequent violation of fifty-one of them is not hypocrisy but strategy.”
4. Trump’s remarks on Hong Kong suggest that the CCP’s “advancing to retreat” strategy has been highly successful. The CCP could feel emboldened by Trump’s remarks and subsequently ramp up suppression in Hong Kong and bring about the “normalization” of the city.
5. The “very substantial phase one deal” will benefit Xi Jinping’s situation ahead of the delayed Fourth Plenum meeting.
Get smart
It should be noted that the “very substantial phase one deal” has not yet been inked and that there are still some weeks to go until Trump and Xi meet in Chile to put pen to paper. Put another way, the situation could easily change at the drop of a hat.
To minimize uncertainty, avoid risks, and seize opportunities, businesses, investors, and governments must look beyond the cut and thrust of Sino-U.S. trade negotiations and instead account for broader geopolitical trends and the severe political crisis (see here and here) in the CCP brought about by a “you die, I live” factional struggle.
