Trump’s make-or-break moment on China trade deal

After eight months in office, almost all of the Trump administration’s aggressive trade agenda has come into focus.

Sectoral tariffs have been applied to industries deemed important to national security. A fresh review of the United States-Mexico-Canada Agreement, negotiated and signed during President Donald Trump’s first term, has been announced. And while lots will hinge on the outcome of a U.S. Supreme Court review of the legality of “reciprocal” tariffs, the president has used them to trigger trade talks and higher rates with almost every major trade partner.

Trump has a chance to stand on higher ground than his predecessors on China. But it all depends on what kind of deal his administration strikes with that country.

But the biggest trade question remains unanswered: How will the second Trump administration ultimately deal with China?

The China question

Negotiations between the U.S. and Chinese governments are ongoing, the results of which will be hugely consequential. But judging from the administration’s own body language and with a November deadline rapidly approaching, you might conclude that the president is most interested in another deal for the sake of a deal.

That would be a mistake. China’s state-directed economy massively distorts global trade. Many of its manufacturing industries are in a state of intentional overcapacity, and the Chinese government has proven willing to absorb those trade barriers rather than correct the imbalances; as such, China remains a major U.S. trading partner, despite the wall of tariffs and other restrictions our nations have raised and lowered against each other.

A bad precedent

Moreover, we know what happened the last time a Trump administration cut a hasty trade deal with China. The promised bulk-commodity purchases weren’t completed, and China made no meaningful changes to specific unfair trade behaviors like intellectual-property theft, circumvention, and its raft of industrial subsidies. While Trump began both his terms as a China trade hawk, looking to differentiate himself from his predecessors, his first-term retreat and ongoing second-term hesitation make that distinction hardly discernible.

Misreading Beijing

Over the last quarter-century, every American president has misread the Chinese Communist Party. President Bill Clinton trusted that market power would liberalize Chinese society; it has since grown more authoritarian. President George W. Bush trusted the power of Hank Paulson to manage the U.S.-China relationship. Instead, the American manufacturing workforce suffered the horrific China shock. President Barack Obama, much more sanguine about China, aimed to mitigate the damage but trusted that bilateral dialogues and engagement through the World Trade Organization would induce Beijing to move off of its model of state capitalism; it instead ran out the clock on him and his efforts.

Donald Trump, the ultimate dealmaker, trusted that an agreement would change the bilateral dynamic, but then Xi Jinping ignored it. President Joe Biden, to his credit, kept many of Trump’s tariffs and even made nascent progress in shoring up our own industrial capacities and enlisting our allies. But, to borrow a phrase utilized by his administration, the “yard” in “small yard and high fence” was, in fact, too small to spark systemic change.

What’s the strategy?

Now Trump has returned, but has his approach evolved? The administration’s actions on China to date could cause whiplash. Perhaps this strategic ambiguity is by design. But it makes one wonder what his priorities are now. Is it a TikTok deal inconsistent with U.S. law? Will we have 145% tariffs, a grand trade bargain, or something in between? Does the president want to make China dependent on American technology for artificial intelligence, or does he want to completely box it out of the latest tech? Will he invite Chinese domestic investment or view it as a national security threat?

And if he announces an agreement, will it be strong enough to move more critical supply chains out of China?

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Photo by Neil Hall/EPA/Bloomberg via Getty Images

After all, defending U.S. manufacturing and its workers against unfair Chinese trade used to be the clear goal. If it remains so, any deal with China must maintain tariffs at a level high enough to limit import volumes, make extremely narrow and time-limited exceptions for the inputs necessary to turbocharge the reshoring effort, and phase tariffs for those categories over time.

The administration must also continue to enlist allies in the effort to surround China. There will be a chance for that with Canada and Mexico during the USMCA negotiations. Higher tariffs for “transshipped” goods, like the recent deal with Vietnam, should be a feature of all these reciprocal agreements. The latest China shock is hitting manufacturing hard in the European Union, so the EU’s participation should be a priority.

Lasting change

Finally, the administration must include the U.S. Congress in this work. Executive orders only go so far, and, in 2025, skepticism about the U.S.-China trade relationship is one of the few areas of bipartisan political agreement. President Trump should leverage that, call on Congress to repeal China’s permanent normal trade relations, and make a higher tariff rate permanent. That would be a huge step toward locking in a sensible derisking strategy and also demonstrating to businesses that the strategy is durable.

Trump has a chance to stand on higher ground than his predecessors on China. But it all depends on what kind of deal his administration strikes with that country. A lot of American factory jobs depend on the outcome.

Editor’s note: This article was originally published by RealClearPolitics and made available via RealClearWire.