China misses trade targets it promised to Trump

By Katie Lobosco, CNN

China fell more than $213 billion short of its commitment to increase purchases of US goods and services that it made to then-President Donald Trump in 2020, according to a report released Tuesday.

The commitment was made in what’s known as the Phase One deal, in which Beijing promised to purchase $200 billion more in American exports than it had in 2017, before a US-China trade war began. Trump and Chinese President Xi Jinping both stopped escalating tariffs after the deal was signed.

The deal required China to meet its purchase commitments by the end of 2021. While China was never on track to meet the target number, a new report from the Peterson Institute for International Economics gives the first complete picture of how much was purchased over the two-year period.

Ultimately, China bought only 57% of the US exports it had committed to purchase under the agreement, according to the report, which analyzed new trade data from the Department of Commerce.

“China bought none of the additional $200 billion of exports Trump’s deal had promised,” wrote Chad Bown, a senior fellow at the institute, in his report.

The Covid-19 pandemic slowed trade around the globe just weeks after the deal was signed, making it even harder for Beijing to meet its purchase commitment.

But experts had been skeptical from the start that China would be able to meet the ambitious purchase commitments, which set specific amounts for different categories including manufacturing, agriculture, services and energy. After roughly 18 months of tariff escalation that nearly halted trade for some US exporters, relationships with Chinese buyers were frayed and had to be rebuilt. Plus, the deal left tariffs in place, keeping the prices of US goods elevated.

Farmers, who were hit particularly hard by the trade war, saw agricultural exports to China return to 2017 levels, but they still fell short of China’s commitment. Soybeans, for example, fell more than 30% short of the target. The Trump administration made about $28 billion in aid payments to help farmers hurt by the tariffs stay afloat.

White House National Economic Council Director Brian Deese told CNN’s “New Day” on Wednesday that the White House is concerned that China hasn’t lived up to its commitments.

He blamed some of China’s failure on “the flawed nature of the trade agreement,” but added, “we think it’s feasible and practical to make them live up to their agreements, but also reset the trade relationship.”

Deese said the Biden administration will focus on areas where Chinese action is posing “strategic threats to our economy.”

Biden leaves tariffs in place

The Phase One agreement didn’t include any repercussions for China if it missed its goals.

But President Joe Biden suggested last month that China’s failure to meet the purchase commitments is the reason he’s leaving Trump’s tariffs on Chinese-made goods in place, despite facing pressure from the US business community to lift them.

“I’d like to be able to be in a position where I can say they’re meeting the commitments, or more of their commitments, and be able to lift some of it. But we’re not there yet,” Biden said at the time.

Members of the Office of the US Trade Representative have been talking to their Chinese counterparts about the Phase One commitments since the fall.

“We have engaged the PRC (People’s Republic of China) on its shortfalls for months, but have not seen real signs towards making good on the purchase commitments and our patience is wearing thin,” said Adam Hodge, spokesperson for the US trade representative, in a statement sent to CNN.

“Regardless of how these negotiations conclude, the fact remains that the Phase One agreement did not address the core problems with the PRC’s state-led economy,” he added.

Trump’s tariffs were imposed on $350 billion in Chinese goods, including baseball hats, luggage, bicycles, TVs and sneakers.

The tariffs make it more expensive for American businesses to import these goods from China, many of which are not manufactured in the United States at a pace that meets the demand. They also hurt manufacturers who need to import certain component parts.

Scott Paul, president of the Alliance for American Manufacturing, said China’s failure to meet the goals is a clear sign that the US must pivot its strategy.

“Anyone who has followed US-China trade closely over the past 20 years can tell you that until the fundamental issues are addressed — things like China’s state-owned enterprises, massive government subsidies, intellectual property theft, lax labor and environmental laws — the massive trade gap will remain,” Paul said in a statement.

Biden is backing a sweeping piece of legislation moving through Congress that aims to counter China’s growing economic influence. It calls for investing billions of dollars in US semiconductor manufacturing and improving the nation’s supply chains, as well as making a number of changes to trade policy aimed at creating a level playing field for American businesses.

The bill passed the House last week and lawmakers must now reconcile the differences between the House and Senate versions of the legislation before it’s sent to Biden’s desk to be signed into law.

This story has been updated with additional details.

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CNN’s Kate Sullivan and Allie Malloy contributed to this report.