Perhaps the most important outcome of the recent Buenos Aires G20 Summit was the hour-long meeting between US Pres. Trump and Chinese Premier Xi Jingping that came to a compromise conclusion. Those who feared an all-out trade war will be disappointed. The two trade giants agreed on a temporary truce in which Trump agreed not to boost tariffs on bn$200 of Chinese goods from 10% to 25% on January 1 for 90 days and China will buy a “very substantial” amount of US agricultural, industrial and energy products. Meanwhile, Beijing says the two sides agreed to open up their markets and to engage in further negotiations.
Many had blamed Trump for starting a trade war that could be ruinous for the US and the world. But, in effect China blinked first. As Trump pointed out, not only was China cheating on its trade agreements, but they need the US trade more than the US needs theirs, and so in order to save their economy they had to come to terms. This is precisely what is happening. China could ill-afford to have these b$200 tariffs slapped on to their goods exported to the US, so they agreed to change their trade practices, that gave them a very unfair advantage contrary to the regulations of the World Trade Organization. In future China will buy US goods to even the trade balance between the two countries. This will be a great boost for the US economy and is in fact a great victory for Trump in re-negotiating trade agreements between the US and other countries.
Over time, previous Presidents have ignored these unfair bilateral trade practices of other countries, either out of fear of causing a trade war or because they genuinely believed that the US should allow its industry and trade to suffer in order to help these less fortunate countries. As an example of this Trump signed the tripartite US-Canada-Mexico trade deal at the Summit to replace the previous NAFTA, that Trump deemed unfair to the US. It must have been acceptable to the leaders of Mexico and Canada because they very quickly agreed to the revised deal and signed the agreement at the Summit.
Another trade partner of the US that has been using unfair one-sided practices is the EU, principally Germany, that for example expected no US tariffs on its cars exported to the US, but retained tariffs on its imports of US cars. Trump is also pushing for a level playing field here too. With his initial victory against China, the fear of an international trade war will be greatly reduced and we can expect positive outcomes for world trade.