Donald Trump’s new tariff threats not expected to derail China trade deal, but Beijing may want to play for time

China will not cancel its phase one trade deal with the United States despite fresh tariff threats by US President Donald Trump, analysts say, but it may seek to postpone its commitments amid the global economic slowdown.

Trump linked US-China trade war politics to accusations that China had covered up and mismanaged the outbreak of Covid-19, which has grown into a global pandemic, in an interview with Fox News on Sunday.

Trump said new tariffs on Chinese goods would be the “ultimate punishment” for its mishandling of the disease.

“Personally, I think [China] made a horrible mistake,” Trump said. “They tried to cover it up. It’s really like [they were] trying to put out a fire. They couldn’t put out the fire.”

Trump said he would end the phase one deal if China did not buy enough US goods. Under the terms of the deal signed in January, China agreed to buy US$200 billion of American agricultural goods and other products in 2020-21.

“They took advantage of our country,” Trump said. “Now they have to buy and if they don’t buy we will terminate the deal. Very simple.”

China has doubled its imports of US agriculture goods, including soybeans, pork and cotton, in the first quarter compared to a year earlier, according to China’s customs authority, but the global economic slowdown is widely believed to have hurt Beijing’s ability to hold up its end of the bargain.

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Trump’s conflation of the trade deal with the coronavirus pandemic may decrease Beijing’s appetite for US goods, said Shi Yinhong, an expert on China-US relations at Renmin University in Beijing.

“It is possible that Trump’s threatening statements will impact China’s willingness to continue to import large amounts of American agricultural products,” Shi said

“The president’s attempt to force China to completely implement the agreement will greatly increase the Chinese government’s anger toward Trump. But I don’t think China will just dismantle the agreement outright, but [its leadership] will wait and see,” he said.

China and the US are locked in an escalating confrontation over the handling of the Covid-19 pandemic. US Secretary of State Mike Pompeo said there was evidence the virus emerged from a lab in Wuhan, the epicentre of the outbreak.

The phase one trade deal was ambitious when it was signed, but the global economic decline caused by the pandemic might force China to delay or adjust its commitments to the trade deal, said Tong Jiadong, a professor of international trade at Nankai University in Tianjin.

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“Realistically, the deal should be delayed and not completely scrapped, for example pushing it back by half a year, or maybe until next January, to enact the deal,” Tong said.

Tong said China would be forced to retaliate if the US took “unreasonable measures” such as applying new tariffs.

The United States has a third of the 3.5 million confirmed Covid 19 cases worldwide.

The US economy, the world’s largest, shrank 4.8 per cent in the first quarter, with economists expecting even further decline this quarter.

Regardless of the fate of the deal, China will continue to have a great need for agricultural and other goods from the US, said Ni Feng, a US specialist with the Chinese Academy of Social Sciences.

“It’s still too early to say for certain the fate of the phase one deal,” he said.

Ni said Chinese observers of US politics realise that Trump and other US politicians were in an election year. They know China will be a hot topic for both Trump and the likely Democratic candidate, Joe Biden.

“Both candidates are vying to see who can be more tough on China. It appears Trump is frustrated with China, the election, and the United States’ own economic difficulties with its epidemic,” Ni said.

Additional reporting by Jodi Xu Klein

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