STREAMING NOW: Watch Now

Fareed: Are we at 'peak America'?

CNN's Fareed Zakaria examines China's swelling sphere of global influence and its effect on the US economy and power around the world.

Posted: Dec 3, 2018 4:55 PM
Updated: Dec 3, 2018 5:14 PM

At the post G20 Summit in Buenos Aires, US President Donald Trump held what the White House called a "very successful meeting" with Chinese leader Xi Jinping and agreed that current US tariffs on $200 billion worth of Chinese imports of 10% will remain unchanged for 90 days. Tariffs were due to be raised to 25% on January 1.

According to the White House, there will be a substantial increase in American exports to China of agricultural, energy, industrial and other products which will reduce the trade deficit in favor of China. The White House statement declares both sides will begin negotiations to resolve differences on forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft.

Chinese state media reported Sunday that the two countries had reached "consensus on economic and trade issues" and that "healthy and stable economic and trade relations conform to common interests of the two countries and the whole world."

The reality is far more unsettling, especially for China. We are merely entering the next phase of what will be an enduring economic competition between the world's two largest economies. For America, the next 90 days is about assessing testing how much further China is prepared to compromise. For China, it must rethink its fundamental negotiating strategy and time is running out.

Consider how China has played this game.

When Trump first flagged his seriousness about tariffs, China promised to retaliate with its own measures in a tit-for-tat response. Surely American firms would not tolerate increased parts and products from China which would dilute their profit margins. American consumers care more about how much they pay for their latest gadget than where it is made or assembled.

Besides, the widespread Chinese assumption was that talk of a trade war was sparked by the President's obsession with current account deficits. In May, China apparently agreed to measures to reduce the then $375 billion surplus it enjoyed with respect to two-way trade with America even if there was disagreement about the size of the reduction. Send negotiators to work out ad hoc agreements for China to buy more American products and economic relations will continue in the same way as it had been before Trump came into power.

That was China's negotiating strategy: threaten retaliatory pain for American firms and consumers and shrink the trade surplus with America. A distracted and divided as American democracy would force Trump to call a truce. Beijing miscalculated.

To China's horror, Trump seems to believe his own rhetoric that trade wars are good and easy to win, especially when one is buying more from another country than selling to them. Washington has since made it not just about reducing the deficit but at attack on Beijing's supposed industrial policy and objectives.

This includes the "Made in China 2025" blueprint which is based on the twin pillars of Chinese "self-sufficiency" and Chinese domination of global exports in these sectors. To get there, America has accused China of blatant intellectual property theft and policies which offer the latter's national champions and preferred domestic firms all manner of unfair disadvantages such as subsidies, tax breaks and protection from foreign competition in Chinese markets.

If China is indeed guilty of these accusations, then it must delay its political and economic objective to become a "moderately prosperous society" by 2021 and a fully developed economy by 2049. If China is not, Trump has nevertheless placed the burden of proof on China to demonstrate that it plays according to the rules.

Meanwhile, inside China, Xi is being accused of triumphalism and unnecessarily picking fights with America. The Shanghai Composite Index has fallen almost 30% since the beginning of the year and the trade troubles come at a time when China is trying to de-leverage its economy while maintaining growth at the 6.5% target at the same time.

Xi will be desperate to avoid the tariff increase on its imports to America from 10 percent to 25 percent in 90 days' time. But offering to help increase American goods into China has only temporarily staved off the threatened 25 percent tariff at the beginning of 2019 -- and then only for 90 days. The pain for China is far from over and Xi might have to walk back his grand economic plans for the country.

In contrast, Trump has the benefit of a still buoyant stock market and a booming American economy to cushion damage inflicted by China.

How will he use his advantage? In his book The Art of the Deal, which was released in 1987, Trump wrote "My style of deal-making is quite simple and straightforward. I aim very high, and then I just keep pushing and pushing and pushing to get what I'm after." And he has further room to move. Getting tough on China economically is perhaps his only main policy for which there is broad Democratic support, significant as the latter has won control of the House in the recent Midterms.

If Trump wanted to discombobulate China, he has achieved that. But it is only a tactical and transient advantage. The problem remains lack of clarity with respect to objectives: going after Chinese intellectual property violations, greater access for American firms in China, discouraging distorting subsidies to state-owned enterprises and national champions, challenging Chinese plans to dominate industries as laid out in "Made in China 2025," disentangling critical American supply chains from reliance on China, or simply reducing the trade deficit.

In Buenos Aires, leaders of the other G20 countries stood warily on the sidelines as they have largely done so far. They would not disagree with Trump's insistence on free, fair and reciprocal trade and Trump needs other advanced economies such as the European Union nations and Japan on his side in this fight.

Yet to convince that it is about more than punishing China or gaining special advantages for only American firms, Trump has 90 days to make his case, not just to China but to the world.

Minnesota Coronavirus Cases

Data is updated nightly.

Cases: 485230

Reported Deaths: 6554
CountyCasesDeaths
Hennepin1006801585
Ramsey43047801
Dakota36254390
Anoka33274384
Washington22065255
Stearns18723201
St. Louis14794262
Scott13273107
Wright12517115
Olmsted1177988
Sherburne871572
Carver771040
Clay690387
Rice670091
Blue Earth593835
Kandiyohi579474
Crow Wing519681
Chisago498445
Otter Tail481870
Benton446190
Winona418049
Mower404131
Douglas392568
Nobles386847
Goodhue385568
Polk342762
McLeod339349
Beltrami337351
Morrison324247
Lyon313044
Itasca312746
Becker310941
Isanti305754
Carlton300149
Steele299711
Pine282016
Freeborn280523
Nicollet258141
Todd247830
Brown244637
Le Sueur235020
Mille Lacs227247
Cass219924
Waseca208917
Meeker207434
Martin189328
Wabasha18623
Roseau180217
Hubbard160640
Houston157314
Dodge15214
Renville149540
Redwood147027
Fillmore13728
Chippewa136335
Cottonwood134820
Pennington134116
Wadena130920
Faribault122917
Aitkin118933
Sibley117310
Watonwan11728
Rock115714
Kanabec107419
Pipestone101424
Yellow Medicine97617
Murray9438
Jackson93510
Swift87918
Pope8025
Marshall77815
Stevens7418
Lake73718
Clearwater71914
Lac qui Parle68316
Wilkin67110
Koochiching61811
Big Stone5163
Lincoln5062
Grant4918
Unassigned47968
Norman4768
Mahnomen4417
Kittson40821
Red Lake3625
Traverse3055
Lake of the Woods2191
Cook1180

Iowa Coronavirus Cases

Data is updated nightly.

Cases: 362189

Reported Deaths: 5414
CountyCasesDeaths
Polk58146549
Linn20653312
Scott18288207
Black Hawk16249291
Woodbury14961211
Johnson1383473
Dubuque13537194
Dallas1135890
Pottawattamie10765143
Story1021645
Warren555274
Clinton543284
Cerro Gordo533681
Webster518787
Marshall496272
Sioux494369
Buena Vista473236
Des Moines457661
Muscatine451191
Wapello4330108
Jasper416966
Plymouth394577
Lee375352
Marion359069
Jones294154
Henry292737
Carroll285548
Bremer280154
Crawford274735
Boone259630
Washington254147
Benton252854
Mahaska224346
Jackson221438
Dickinson217439
Tama213465
Kossuth208154
Clay193525
Hamilton192042
Delaware188839
Winneshiek188427
Buchanan185129
Fayette185035
Page183219
Hardin181039
Wright179731
Harrison179669
Cedar177923
Clayton168053
Butler166331
Mills163120
Floyd162740
Madison154518
Cherokee153935
Poweshiek153730
Hancock146829
Lyon145841
Allamakee145646
Iowa144423
Appanoose139147
Grundy139030
Jefferson138232
Winnebago138230
Cass134151
Calhoun133711
Mitchell130840
Louisa128241
Union126331
Chickasaw125213
Sac124218
Emmet121240
Shelby121033
Franklin118419
Humboldt117425
Guthrie116528
Palo Alto104921
Montgomery103936
Howard103121
Clarke100520
Unassigned9890
Keokuk98129
Monroe93128
Adair91928
Ida91032
Pocahontas85519
Davis82623
Monona81627
Greene77310
Lucas73821
Osceola70514
Worth6987
Taylor66412
Fremont5919
Decatur5789
Van Buren55918
Ringgold52020
Wayne48821
Audubon4869
Adams3264
Rochester/St. Mary'S
Clear
37° wxIcon
Hi: 43° Lo: 14°
Feels Like: 26°
Mason City
Clear
40° wxIcon
Hi: 43° Lo: 17°
Feels Like: 30°
Albert Lea
Partly Cloudy
36° wxIcon
Hi: 40° Lo: 14°
Feels Like: 25°
Austin
Partly Cloudy
37° wxIcon
Hi: 41° Lo: 13°
Feels Like: 27°
Charles City
Partly Cloudy
36° wxIcon
Hi: 42° Lo: 15°
Feels Like: 25°
Mild conditions expected this week
KIMT Radar
KIMT Eye in the sky

Community Events