China US Tariffs WTO Reforms

In this photo taken Thursday, Nov. 22, 2018, a woman works in a weaving factory in Jinjiang city in southeast China's Fujian province. (Chinatopix Via AP)

The U.S.-China tariff war is headed toward a major showdown this weekend when President Trump meets China’s President Xi Jinping on the sidelines of the G-20 meeting in Buenos Aires to cap off months of negotiations on establishing better trade relations. The prospects for a breakthrough don’t look good, but Mr. Trump should stick to his position.

While financial markets appear to be betting on a quick settlement of the dispute, there are good reasons to think the trade war could escalate further without major Chinese concessions.

As The Post and Courier’s David Wren reported Sunday, importers already are busy stocking up on Chinese goods in anticipation of even higher tariffs going into effect.

Given China’s history of bad faith in observing trade agreements, President Trump is right to demand something concrete. On Monday, he told The Wall Street Journal it is highly unlikely that he will suspend a planned increase in tariffs from 10 percent to 25 percent on $200 billion of Chinese import goods that is scheduled to take effect Jan. 1. The president also threatened to put tariffs on the remainder of Chinese imports, valued at $267 billion, “if we don’t make a deal.”

But a deal of some kind is absolutely critical in order to avoid economic disaster next year.

Already, the tariff war has created pain in American markets, affecting such major South Carolina employers as BMW and Volvo. But according to some estimates it has hit Chinese markets more strongly. The White House appears to believe this puts the United States in a better bargaining position. Mr. Trump’s top economic adviser, Larry Kudlow, told the Journal, “Our economy is in good shape. Theirs is not.”

A similar trade dispute in 1992 ended with China promising to take steps to prevent the theft of American intellectual property that were never carried out. In 1995 the U.S. General Accounting Office reported that American firms were continuing to experience “serious and unabating” intellectual-property problems with China, including the forced transfer of technology as a requirement of doing business there.

That lesson, and the ways China exploits the terms on which it was admitted to the World Trade Organization, are strong reasons for demanding major reforms in Chinese trade policies and much better access to China for American goods and services.

The Hong Kong-based South China Morning Post reports that Chinese trade experts “believe the pressure is real for China to respond to U.S. demands.” It quotes Shi Yinhong, an expert on Sino-U.S. relations at Beijing’s Renmin University of China, as saying, “China will not be able to get away with general and vague promises this time. It has become clear that the Trump administration does not want more promises, it wants action.”

The United States is China’s biggest market. President Xi will face major discord in China if he fails to preserve that access, so he is under pressure to make real reforms in his nation’s trade practices.

President Trump should stick to his guns. But he should also keep in mind just how much is at stake.