Fareed: Are we at 'peak America'?

CNN's Fareed Zakaria examines China's swelling sphere of global influence and its effect on the US economy and power around the world.

Posted: Dec 3, 2018 5:53 PM
Updated: Dec 3, 2018 6:14 PM

At the post G20 Summit in Buenos Aires, US President Donald Trump held what the White House called a "very successful meeting" with Chinese leader Xi Jinping and agreed that current US tariffs on $200 billion worth of Chinese imports of 10% will remain unchanged for 90 days. Tariffs were due to be raised to 25% on January 1.

According to the White House, there will be a substantial increase in American exports to China of agricultural, energy, industrial and other products which will reduce the trade deficit in favor of China. The White House statement declares both sides will begin negotiations to resolve differences on forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft.

Chinese state media reported Sunday that the two countries had reached "consensus on economic and trade issues" and that "healthy and stable economic and trade relations conform to common interests of the two countries and the whole world."

The reality is far more unsettling, especially for China. We are merely entering the next phase of what will be an enduring economic competition between the world's two largest economies. For America, the next 90 days is about assessing testing how much further China is prepared to compromise. For China, it must rethink its fundamental negotiating strategy and time is running out.

Consider how China has played this game.

When Trump first flagged his seriousness about tariffs, China promised to retaliate with its own measures in a tit-for-tat response. Surely American firms would not tolerate increased parts and products from China which would dilute their profit margins. American consumers care more about how much they pay for their latest gadget than where it is made or assembled.

Besides, the widespread Chinese assumption was that talk of a trade war was sparked by the President's obsession with current account deficits. In May, China apparently agreed to measures to reduce the then $375 billion surplus it enjoyed with respect to two-way trade with America even if there was disagreement about the size of the reduction. Send negotiators to work out ad hoc agreements for China to buy more American products and economic relations will continue in the same way as it had been before Trump came into power.

That was China's negotiating strategy: threaten retaliatory pain for American firms and consumers and shrink the trade surplus with America. A distracted and divided as American democracy would force Trump to call a truce. Beijing miscalculated.

To China's horror, Trump seems to believe his own rhetoric that trade wars are good and easy to win, especially when one is buying more from another country than selling to them. Washington has since made it not just about reducing the deficit but at attack on Beijing's supposed industrial policy and objectives.

This includes the "Made in China 2025" blueprint which is based on the twin pillars of Chinese "self-sufficiency" and Chinese domination of global exports in these sectors. To get there, America has accused China of blatant intellectual property theft and policies which offer the latter's national champions and preferred domestic firms all manner of unfair disadvantages such as subsidies, tax breaks and protection from foreign competition in Chinese markets.

If China is indeed guilty of these accusations, then it must delay its political and economic objective to become a "moderately prosperous society" by 2021 and a fully developed economy by 2049. If China is not, Trump has nevertheless placed the burden of proof on China to demonstrate that it plays according to the rules.

Meanwhile, inside China, Xi is being accused of triumphalism and unnecessarily picking fights with America. The Shanghai Composite Index has fallen almost 30% since the beginning of the year and the trade troubles come at a time when China is trying to de-leverage its economy while maintaining growth at the 6.5% target at the same time.

Xi will be desperate to avoid the tariff increase on its imports to America from 10 percent to 25 percent in 90 days' time. But offering to help increase American goods into China has only temporarily staved off the threatened 25 percent tariff at the beginning of 2019 -- and then only for 90 days. The pain for China is far from over and Xi might have to walk back his grand economic plans for the country.

In contrast, Trump has the benefit of a still buoyant stock market and a booming American economy to cushion damage inflicted by China.

How will he use his advantage? In his book The Art of the Deal, which was released in 1987, Trump wrote "My style of deal-making is quite simple and straightforward. I aim very high, and then I just keep pushing and pushing and pushing to get what I'm after." And he has further room to move. Getting tough on China economically is perhaps his only main policy for which there is broad Democratic support, significant as the latter has won control of the House in the recent Midterms.

If Trump wanted to discombobulate China, he has achieved that. But it is only a tactical and transient advantage. The problem remains lack of clarity with respect to objectives: going after Chinese intellectual property violations, greater access for American firms in China, discouraging distorting subsidies to state-owned enterprises and national champions, challenging Chinese plans to dominate industries as laid out in "Made in China 2025," disentangling critical American supply chains from reliance on China, or simply reducing the trade deficit.

In Buenos Aires, leaders of the other G20 countries stood warily on the sidelines as they have largely done so far. They would not disagree with Trump's insistence on free, fair and reciprocal trade and Trump needs other advanced economies such as the European Union nations and Japan on his side in this fight.

Yet to convince that it is about more than punishing China or gaining special advantages for only American firms, Trump has 90 days to make his case, not just to China but to the world.

Indiana Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 31376

Reported Deaths: 1976
CountyConfirmedDeaths
Marion9132533
Lake3260167
Cass15816
Allen124065
St. Joseph115534
Hendricks111765
Hamilton109691
Johnson1080104
Elkhart99127
Madison58058
Bartholomew47433
Porter47321
Clark45338
LaPorte39921
Tippecanoe3693
Jackson3591
Delaware34933
Howard34517
Hancock31727
Shelby31221
Floyd31238
Boone28135
Morgan25824
Vanderburgh2422
Decatur22231
White2218
Montgomery22116
Clinton2081
Harrison18421
Noble18120
Grant18120
Dubois1782
Greene16723
Warrick16426
Dearborn16221
Monroe15810
Henry1566
Lawrence14222
Vigo1417
Miami1371
Putnam1317
Jennings1264
Orange12422
Scott1163
Ripley1126
Franklin1068
Carroll912
Daviess8116
Steuben792
Kosciusko781
Newton7410
Wabash722
Wayne695
Marshall641
Fayette634
LaGrange602
Jasper541
Washington521
Fulton461
Rush452
Jay430
Jefferson411
Clay391
Pulaski390
Randolph383
Whitley342
Brown331
Sullivan321
Starke313
Owen311
DeKalb281
Knox240
Benton240
Crawford230
Perry230
Huntington222
Tipton221
Wells220
Blackford201
Switzerland190
Fountain172
Posey170
Parke170
Spencer141
Gibson132
Ohio130
Adams121
Warren121
Vermillion90
Martin90
Union80
Pike60
Unassigned0152

Ohio Coronavirus Cases

Data is updated nightly.

Confirmed Cases: 31911

Reported Deaths: 1969
CountyConfirmedDeaths
Franklin5188228
Cuyahoga3927209
Marion261721
Hamilton2403128
Lucas2107229
Pickaway204235
Mahoning1334169
Summit1220159
Butler77625
Stark68289
Lorain64158
Montgomery59315
Trumbull52542
Columbiana47850
Belmont38412
Miami34830
Warren32819
Tuscarawas3122
Portage31058
Delaware29613
Medina28819
Ashtabula27732
Wood27445
Lake26711
Geauga25629
Wayne24850
Fairfield2403
Clark2066
Licking20410
Allen18931
Mercer1843
Richland1833
Clermont1815
Erie1555
Darke15116
Madison1337
Washington11718
Morrow1041
Crawford1043
Greene935
Ottawa907
Putnam8514
Monroe7111
Hocking654
Sandusky6510
Ross632
Jefferson622
Auglaize593
Huron521
Williams511
Hancock481
Muskingum450
Union430
Clinton430
Hardin400
Shelby402
Logan370
Wyandot362
Fulton360
Fayette340
Defiance322
Preble311
Guernsey310
Lawrence280
Carroll282
Champaign261
Holmes251
Brown241
Coshocton240
Knox231
Vinton190
Perry181
Highland181
Seneca182
Ashland170
Scioto150
Henry140
Athens141
Paulding130
Jackson110
Harrison100
Adams81
Gallia71
Pike60
Meigs60
Morgan50
Noble50
Van Wert50
Unassigned00
Fort Wayne
Clear
79° wxIcon
Hi: 84° Lo: 65°
Feels Like: 81°
Angola
Clear
81° wxIcon
Hi: 81° Lo: 66°
Feels Like: 82°
Huntington
Broken Clouds
78° wxIcon
Hi: 86° Lo: 65°
Feels Like: 80°
Decatur
Clear
73° wxIcon
Hi: 75° Lo: 65°
Feels Like: 73°
Van Wert
Clear
73° wxIcon
Hi: 85° Lo: 65°
Feels Like: 73°
Pop-Up Storms Tuesday
WFFT Radar
WFFT Temperatures
WFFT National

Community Events