Most of the media won’t get it, probably even when it happens, but all of the signals are pointing to President Trump getting deals with both China and Mexico — and they will be better deals than what the United States has or has had.
Mexico is actually the easier nut to crack here. The government is corrupt, weak and totally reliant on the United States for both its legal economy and its black market economy. A full-out trade-war with the U.S. would of course cause some harm to the U.S., but would be catastrophic for Mexico. And more importantly, for Mexico’s government.
If the current political leadership wants to stay in power, and if future political leadership wants to attain power, they need a decent relationship with the U.S. And given the millions of Mexicans sending billions of dollars back to Mexico in remittances, running on an anti-American plank is not likely to be popular or successful — at least for long.
The tariffs on all Mexican imports began at 5 percent and rise by 5 percentage points each month before reaching 25 percent in October — unless Mexico takes serious steps to stop the flow of Central American migrants now swamping the southern American border. These 25 percent tariffs would crush the Mexican economy, and possibly have the perverse effect of strengthening the deadly cartels even more.
Mexico’s leadership is fully attuned to this dynamic, and that is why Mexican leaders are moving quickly to respond to Trump’s punitive tariffs launched Friday, with escalations coming, by agreeing to meet in Washington today.
President Trump tweeted Sunday: “Mexico is sending a big delegation to talk about the Border. Problem is, they’ve been ‘talking’ for 25 years. We want action, not talk.”
They’ve been “talking” and American leaders have been “talking” and everyone was fine with the arrangement as long as nothing was ever done. It’s obvious this President expects something to be done or those tariffs will just keep increasing.
So Mexican Economy Minister Graciela Marquez will arrive in Washington today (Monday) to meet with U.S. Commerce Secretary Wilbur Ross. On Wednesday, delegations led by Secretary of State Mike Pompeo and Mexico Foreign Relations Secretary Marcelo Ebrard will meet in Washington.
That was fast.
China is a tougher nut, but some of the same dynamics are in place as with Mexico.
As with Mexico, China is far more reliant on the U.S. than the U.S. is on China. Their economy is built on selling to the giant and prosperous U.S. consumer market. If that is cut off or diminished through tariffs, their much smaller secondary markets leave them in an economic tailspin, particularly considering that they are facing other economic headwinds, such as an aging and soon declining population, a fluctuating currency and increased competition from India (an ally that Trump should look to for a friendlier trade deal.)
One of the ways the Chinese Communist Party has maintained its iron fist of control is by not being communist, or socialist, but by freeing up its markets and allowing a form of capitalism to operate. That has created huge wealth gains, a growing economy and an emerging middle class.
Chinese who lived in generational poverty seeing the opportunity for a better life for themselves and their children have been willing to live with the totalitarianism of the Communist Party. But they may be much less willing to put up with the iron rule if the economy tanks.
One of the last things the Chinese government wants as it pursues its global ambitions is unrest at home. A trade war with the U.S. would risk that, and could begin to threaten their hold on power.
But the Chinese’ global ambitions based on their historic view of themselves as the Middle Kingdom — the center of the world — also drive them to be much more intransigent negotiators than the Mexicans. And patient negotiators as they take the long view. Newt Gingrich does a terrific job spelling this out in writing and on his podcast.
These are China’s competing interests in the negotiations: showing strength at home and abroad while actually being strong at home and abroad.
In the end though, their Middle Kingdom aspirations and desire for long-term control will mean that a new trade agreement is the lesser bitter pill to swallow. The Chinese are ultimately very pragmatic, and would likely view a new trade deal — even one that was not tilted in their favor — to be worth the trade-off for their ultimate vision.
That is why we’ve seen China moderating its original harsh rhetoric to Trump pulling out of negotiations after the Chinese deleted most of what they had agreed to. They had pulled this trick on previous administrations, counting on American president’s willingness to take a fake victory, if you will, and they were right.
However, they miscalculated with Trump. He’s just not a typical politician in so many ways.
So Beijing released a government policy paper on trade issues Sunday which as usual blamed the U.S. for the negotiations breakdown, but also turned much more conciliatory. They’ve realized Trump won’t come back to the table without real movement and so throughout the paper and at the briefing at which it was released, the Chinese government said repeatedly that they are willing to return to negotiations.
“We’re willing to adopt a cooperative approach to find a solution,” Vice Commerce Secretary Wang Shouwen said.
No talks are scheduled, but U.S. and Chinese trade officials will be at meetings of the Group of 20 major economies this weekend in Japan. A possible meeting between Mr. Trump and President Xi Jinping of China at the G-20 summit is seen as an opportunity to re-start trade talks. Don’t be surprised if that happens.
China “is expressing its wish to work together,” said Zhang Yansheng, a researcher at the state-backed think tank China Center for International Economic Exchanges, told the Wall Street Journal.
China will come back to the table that Mexico is already at. And Trump and Americans will ultimately get a better trade deal with China and better security on our southern border with Mexico — unless China holds out until November 2020 and we elect a new president that falls back to the status quo of China picking our pockets and stealing our tech.
EDITORS NOTE: This Revolutionary Act column is republished with permission.