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There is less to the Phase 1 China–U.S. trade agreement than the initial fanfare in the U.S. would suggest but the negative consequences for the global trading system should be of concern to others, including Canada. Even more ominous perhaps are the dramatic moves China is making to develop Artificial Intelligence (AI), which will likely be the major driver of economic growth and security prowess in the next quarter-century.

President Donald Trump wanted his tariff war to reduce the U.S. trade deficit with China. That deficit has actually increased from US$544 billion in 2016 to US$691 billion in the 12 months ending in October 2019.

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The administration had also intended to dismantle the core of China’s industrial strategy — extensive subsidies and other forms of state assistance that have stimulated the growth of many Chinese companies. The U.S. sought explicitly to prevent the theft of intellectual property and the forced divestiture of foreign technologies. While there is reportedly some agreed language on each of these issues there is no indication of precise commitments or enforcement measures. The U.S. could have enhanced its leverage on each by enlisting support from such key allies as Canada, Japan and the EU. Instead, the Trump administration chose to go it alone suffering from delusions of “America First” grandeur. These thorny issues have been effectively punted to Phase 2.