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Deal or No Deal, the U.S.-China Relationship Is Beyond Repair

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Are we nearing a deal to end the U.S.-China trade war? President Trump seems to think so. “We’re getting very, very close,” he told a group of governors visiting the White House in February.

Citing “substantial progress” in recent negotiations, Trump postponed a March 1 deadline that would have sharply increased the rate of tariffs on $200 billion in Chinese goods. Trump said he hoped a meeting with China’s President Xi Jinping, most likely in late March at Mar-a-Lago, would become a “signing summit.”

Trump’s lunge for a deal may be driven in part by the fast-advancing U.S. electoral calendar. As Democrats begin lining up to run against him next year, the President may be hoping to avoid the stock-market gyrations and economic pain an escalating trade war might soon begin to inflict.

He could surely use what he sees as a big political win on China at a time when multiple investigations, increasingly aggressive Democratic lawmakers, his failure to build a border wall and embarrassing public testimony from his former personal lawyer Michael Cohen are all clouding his political horizons.

But as with his would-be reset with Russia, Trump can’t change the structural game with China with a single agreement. Although Trump entered office predicting he would improve relations with Moscow, lawmakers of both parties continue to accuse Russia of interference in U.S. elections and various other crimes. Sanctions remain in place and may well expand. Neither Trump’s praise nor congressional punishment has persuaded Russia to change course.

The same goes for China. Trump will doubtless win some concessions from Xi, perhaps expanded access for U.S. companies to the Chinese marketplace, agreements on currency management, more Chinese purchases of American soybeans and promises in principle to address other U.S. demands.

What Trump cannot do is persuade Xi to overhaul China’s broader economic model. The Chinese state will continue to subsidize state-owned companies and privately owned national champions, tilting the global playing field in its favor. It will push forward, by any means necessary, on expanding technological innovation to compete with U.S. and European firms in the most important economic sectors of the 21st century–AI, fintech and consumer electronics, for example. On these subjects, whatever Xi promises Trump or Chinese officials say publicly, they will not compromise.

There are also limits to what Trump can offer to get that deal with Xi. If he signs off on an agreement that removes pressure on Chinese telecom giants Huawei and ZTE, each suspected of undermining U.S. national security, he’ll get pushback from Congress. If he tries to use Meng Wanzhou–the Huawei executive arrested in Canada for allegedly violating U.S. sanctions on Iran–as a bargaining chip, he’ll face criticism that he’s meddling in a law-enforcement matter and exceeding his authority.

Even if Trump and Xi cheer markets in March with a broad Mar-a-Lago agreement over coffee and chocolate cake, the damage to relations between the superpower and the rising challenger has already been done. Trust between them now stands at its lowest point in 30 years, and each government will continue a long-term project of making its side less vulnerable to pressure from the other.

In short, the U.S.-China relationship is fundamentally broken, and no politically inspired, vaguely worded compromise will change that.

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