The U.S. and China are currently negotiating for a deal that will put an end to the ongoing trade conflict. However, the protests in Hong Kong have complicated the issue. President Trump has stated that finalizing a deal will be tough if the situation in Hong Kong worsens.
Hong Kong and the trade deal
“Millions of jobs are being lost in China to other non-tariffed countries. Thousands of companies are leaving. Of course, China wants to make a deal. Let them work humanely with Hong Kong first!” tweeted President Trump
The president also warned that if something like the Tiananmen massacre were to repeat in Hong Kong, the U.S. political climate would become so negative against Beijing that a trade deal would be an impossibility. However, Trump has repeatedly said that he does not view the Hong Kong protests as some kind of leverage to hold over China. Instead, he hopes that Beijing will be able to resolve the issue in a humane manner and believes that Chinese President Xi Jinping has the ability to do that.
Vice President Mike Pence, has also warned several times about the deteriorating freedoms in Hong Kong and how it’ll be a hindrance to arriving at a U.S.-China trade deal. “For the United States to make a deal with China, Beijing needs to honor its commitments, beginning with the commitment China made in 1984 to respect the integrity of Hong Kong’s laws through the Sino-British Joint Declaration… It will be much harder for us to make a deal if something violent happens in Hong Kong… our administration will continue to urge Beijing to act in a humanitarian manner,” he said in a statement (The White House).
Beijing is reportedly nervous about the U.S. government trying to make peace in Hong Kong a part of the trade agreement. “We noticed that President Trump had said that Hong Kong is part of China and [China and Hong Kong] can sort it out on their own. We hope the U.S. side can honor these words,” Gao Feng, Commerce Ministry spokesman, said in a statement (South China Morning Post).
Currently, the U.S. has imposed high tariffs on Chinese imports and is threatening to increase the rate further as well as bring more products under the new tariff rules. As a consequence, the manufacturing sector in China has been contracting. Many manufacturers are moving out to other places like Southeast Asia, India, Latin America, and Bangladesh. For the Chinese economy to continue growing or even keep performing at current levels, it is necessary that Beijing arrive at a trade agreement with Washington and get the extra tariffs on Chinese imports revoked.
Larry Kudlow, White House economic advisor, believes that a crucial trade meeting between the two countries will happen next month. “The deputies’ call [with Chinese officials] was quite constructive and this may lead to a meeting of the principals here in Washington, D.C…. We are still planning for the Chinese team to come over here in September,” he said in a statement after a recent talk between the two sides (Yahoo Finance). With the U.S. elections due in 2020, how Trump deals with the trade issue will play a crucial role in his reelection.