US-China Trade War: Will Pro-Democracy Legislation Tank Trade Agreement?

Chinese officials have expressed anger about U.S. President Donald Trump’s decision to sign legislation backing Hong Kong’s pro-democracy demonstrators, but experts said Monday Beijing nor Washington is likely to take any concrete action, especially since trade negotiations are dragging on.

China Monday suspended visits by U.S. military ships and aircraft to Hong Kong. Foreign Ministry spokeswoman Hua Chunying also said sanctions would be imposed on human rights organizations like the National Endowment for Democracy and Human Rights Watch.

“China urges the U.S. side to correct its mistakes and stop any words and deeds that interfere in Hong Kong affairs and China’s internal politics,” Hua told reporters last week.

Pro-democracy protests have paralyzed Hong Kong for months and rebuked the Beijing-backed government in recent local elections. In its latest report dated mid-September, Amnesty International reported Hong Kong Police engaged in “reckless and indiscriminate tactics” and subjected those arrested to “torture and other ill-treatment in detention.” At the time, 1,300 people had been arrested. Scores more have been detained since.

“I signed these bills out of respect for President Xi [Jimping], China and the people of Hong Kong,” Trump said. “They are being enacted in the hope that leaders and representatives of China and Hong Kong will be able to amicably settle their differences leading to long term peace and prosperity for all.”

China’s Vice Foreign Minister Le Yucheng told U.S. Ambassador Terry Branstad the bill represented “serious interference in China’s internal affairs and a serious violation of international law.”

But hanging over the diplomatic wrangling is the question of whether the legislation and retaliation will have any impact on the trade talks. Recent economic reports have highlighted a slowing of the Chinese economy, increasing pressure to resolve the trade war with the United States.

Trump announced preliminary agreement had been reached on a phase one deal in October, but since then, negotiators have failed to nail down the language. They’re coming up against a Dec. 15 deadline for a new round of tariffs on $160 billion in Chinese products, including electronics and other consumer items.

Meanwhile Monday’s Caixin/Markit Manufacturing Purchasing Manager’s Index edged up a tick in November to 51.8, the strongest growth in nearly three years, and follows a report Saturday from the National Bureau of Statistics showing the first expansion in seven months.

Jeff Yastine, editorial director at Banyan Hill Publishing, said he doubts the legislation will have any impact on the trade talks and may even help.

“The protests, and the bill, only serve to underscore the pressure that Chinese authorities are under to come to an agreement of some kind with the Trump administration and put their economy on a better footing,” Yastine said.

Ryan McMaken, senior editor at the Mises Institute, said though passage and signing of the pro-democracy legislation was a nice gesture, it was more a show for U.S. voters than anything that will lead to direct support for the demonstrators.

“China is not a small, poor country that can be invaded without serious consequences for the US, so the US is limited to mere statements of support for the protesters,” said in response to an inquiry from International Business Times. “The U.S. can't even meaningfully impose sanctions on China either, since inexpensive imports from China are very important in keeping the U.S. cost of living from increasing significantly.”

Robert R. Johnson, professor of finance, Heider College of Business, Creighton University, called Trump’s action a “bold” move to increase his re-election chances.

“With the signing of these bills he is trying to thread the needle and it just may work. That is, achieving a trade deal with China while showing both his base and swing voters a pro-democracy stance,” he said. “China desperately needs a trade deal because of its struggling economy. President Trump needs a trade deal because any re-election chance is predicated on a strong U.S. economy.”