Trump Was Facing a Dilemma

President Donald Trump resumed trade talks with China solely because he is seeking to avoid an economic recession as the 2020 election looms, says Jan Techau of the German Marshall Fund. The presidential election taking place next year tied Trump’s hands.

Jörg Münchenberg: Are the revived trade negotiations between China and the United States the most important result of the G20 meeting?

Jan Techau: Yes, and by a long way. Trade was the crucial issue on which the financial markets were focused. The world economy is not spectacularly vibrant at the moment, meaning that we are facing low growth rates and multiple risk factors, one of which is the danger of an escalating trade war between the United States and China.

Trade was therefore very important—taking the threat of escalation off the table—and the outcome was successful. President Trump backed down, one has to say, because he ultimately fears an economic recession in the United States next year. Actually, he cannot afford to fight a trade war.

Jörg Münchenberg: Didn’t Trump sabotage himself in the end? After all, he is someone who claims to always apply maximum pressure during negotiations, and now he is backing down. Was this move not out of line with his overall strategy?

Jan Techau: Yes, this was a risky move, but Trump was facing a dilemma. He had conflicting goals. On the one hand, he had to show strength, and on the other hand, he could not afford to enter next year’s presidential contest under a slowing economy.

Experts are predicting that the U.S. economy could enter a recession next year. Trump decided, just to be on the safe side, to give some ground in the trade dispute without risking poor economic results in the decisive upcoming election year.

Jörg Münchenberg: Of course. Let us take a closer look at the G20 meeting on the whole. It is noteworthy that the United States continues to eschew climate-change mitigation. The final declaration stopped short of denouncing protectionism, calling instead for a free and fair trade environment. In the end, however, should we say that the G20 meeting was successful if only because a common statement could be agreed upon?

Jan Techau: This is always difficult to assess. For quite some time now, at these international summits we hear nothing but pessimism: “We cannot get things right, we cannot reach a final declaration.” In the end, however, agreement is usually attained somehow. Of course, this could be a negotiating tactic: reducing expectations to the lowest possible level. But I think that the crucial takeaway is that a deal was struck. On the climate-change issue, they managed to reach agreement by leaving the Americans out and the latter, in turn, did not block the final statement. It was not a politically costly concession for the Americans but, for other countries, it was absolutely important so stand up to Trump on this issue.

With regard to trade, what the declaration says about protectionism is far less important than what is playing out in the bilateral relationship between the United States and China. In addition, it is noteworthy that the European Union and the South American trade bloc Mercosur concluded their own trade agreement. While unrelated to the G20 summit, it is a significant development. It is a negotiated agreement that entails a clear commitment to free trade, and the fact that these two large blocks are joining forces is important news.