A truce has been struck in the US-China trade war but the terms of the ceasefire make clear who holds the upper hand when hostilities inevitably resume.
In exchange for the US not imposing higher tariffs on about half of Chinese exports from January 1, Beijing has agreed to discuss a long list of concessions that would, if fully implemented, fundamentally alter the very nature of the Chinese system.
According to a White House summary of the dinner meeting between Donald Trump and Xi Jinping at the G20 summit in Buenos Aires, China has agreed in the short term to buy a “very substantial amount of agricultural energy, industrial and other product from the US”. It has also agreed to begin immediately negotiations on “structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture”.
America has offered nothing except a 90-day deadline, after which it will increase tariffs on $200bn of Chinese imports from 10 per cent to 25 per cent — as it originally planned to do on January 1 — if Mr Trump is not satisfied with Beijing's concessions.
Since it is virtually impossible for Mr Xi to implement or even agree to such far-ranging changes to China's economy, it is almost certain that the trade war will resume with a vengeance by the end of February 2019.
It is true that Mr Xi has bought himself and the struggling Chinese economy some time. He and his colleagues must be hoping that special counsel Robert Mueller is closing in on his quarry or that Mr Trump will be otherwise distracted when the 90 days are over.
Some critics have questioned why Mr Trump would agree to a truce involving such non-committal promises from China. By doing so, he has diluted the leverage he created out of nothing by imposing the trade tariffs in the first place.
But by pausing and setting onerous terms for his negotiating partner, he can appear strong and reasonable at the same time. This allows Mr Trump to mollify those in his administration, such as Treasury secretary Steven Mnuchin and National Economic Council director Larry Kudlow, who have argued for more leniency towards China, while giving up nothing except a little of the momentum that was building towards an all-out trade war.
Markets have breathed a sigh of relief and no doubt many of the heads of state Mr Trump met during the G20 are also pleased to see him appear more moderate and reasonable on trade.
But nobody in Beijing will be under any illusions that the trade war with the US has been averted, even if that is how it is being spun in China's tightly controlled official media.
In stark contrast to the White House statement, China's official summary of the Buenos Aires meeting did not mention the 90-day deadline or most of the other Chinese concessions outlined by the Americans.
Reading the Chinese statement in isolation, most observers would conclude that Mr Xi had won a big diplomatic victory by forcing Mr Trump to abandon his trade war unilaterally.
But whether Beijing publicly acknowledges the promises included in the White House statement or not is irrelevant since the power to impose higher tariffs in 90 days' time is entirely in the hands of Mr Trump.
Copyright The Financial Times Limited 2018
