Will Trade War Between The US vs China be Ended?

Will Trade War Between The US vs China be Ended?

President Donald Trump said a new round of trade talks with China is underway, ending a stalemate between the two countries amid escalating tariffs. “It has already begun. They are speaking very much on the phone,” Trump told reporters at the White House on Monday, referring to the two nations’ trade negotiators. “It actually began before our meeting,” he added, referring to his talks with Chinese President Xi Jinping at the Group of 20 summit in Japan.

The two leaders announced the resumption of talks after their meeting, reflecting a truce in their trade war. Trump said he would hold off imposing an additional $300 billion in tariffs as talks continued.

Trump made the threat of more duties in May after he said China reneged on language that had previously been negotiated. It wasn’t clear what concessions Xi offered to get talks restarted.

The U.S.-China trade war and a spike in oil prices from geopolitical tensions have the potential to push the world into recession next year, according to renowned doomsayer Nouriel Roubini. “It’s a scary time for the global economy,” the head of Roubini Macro Associates, sometimes known as “Dr. Doom,” said in an interview with Bloomberg TV. He said he expects a recessionary shock to materialize next year.

Equities by contrast are telegraphing confidence that central banks will support the economy as U.S. and Chinese negotiators resume trade talks. The rub for Roubini is that monetary policy makers’ ability to respond to shocks is impaired, with benchmark interest rates still at historically low — and in some cases negative — levels. High levels of debt will also pose a constraint, he said.

Optimism will likely collapse “like in every other recession,” he said. Further unconventional monetary policy is likely to be needed, he added. On the trade front, deglobalization looms as countries around the world have to choose which country to align with — the U.S. or China — once the bilateral negotiations collapse,

On top of that, an oil-price shock coming from Iran tensions would raise the prospect of 1970s-style stagflation as a rise in crude prices coincides with slower growth, Roubini said. Speaking at a blockchain summit in Taipei, Roubini reiterated his skepticism toward cryptocurrencies such as Bitcoin.

The U.S. and China are headed for an uneasy trade-war truce and a return to the negotiating table. While financial markets may cheer such a breakthrough, the celebrations may be short-lived when the long path to a deal is considered.

If President Donald Trump and China’s Xi Jinping announce a new round of talks as expected, any optimism ought to be balanced with a healthy dose of reality. The talks collapsed six weeks ago not over a few lines of fine print, but over fundamentally different worldviews that have only hardened since then.

Even a temporary truce could still be in doubt: The Wall Street Journal reported Thursday, citing unidentified Chinese officials, that Xi’s terms for a trade truce with Trump will include an insistence that the U.S. lift its ban on the sales of technology to Huawei Technologies Co.

Heading into a meeting at the Group of 20 summit in Japan starting Friday, the world’s largest economic engines have a relationship that’s now more strained and colored by mistrust than it has been at any time during Trump’s presidency. The two sides have had little contact during the stalemate, and plans for this week’s meeting between the leaders have come together in a flurry of last-minute phone calls. Meantime, China says there’s no change in its conditions for a deal.

Since talks ended May 10, Trump has not only raised tariffs on China and threatened more, he’s also opened the door to a new technological Cold War by putting telecommunications giant Huawei on a blacklist intended to cut off its access to U.S. suppliers.

In a conversation between Robert Lighthizer, Trump’s trade czar, Treasury Secretary Steven Mnuchin and Liu on Monday, the sides discussed how to present a cease-fire that will restart talks. The plan is for the U.S. to hold fire on tariffs on a further $300 billion in goods from China ranging from smartphones to children’s clothing, according people briefed on the discussions.

Lighthizer and Liu also, however, offered clashing visions of what an eventual grand bargain might bring, one person briefed on the call said. Liu insisted any final deal would have to be balanced and not just include a litany of Chinese concessions. Lighthizer responded that China’s trade, investment, and regulatory practices had been a problem for decades and that Beijing must offer much more than the U.S.

After peaking in October 2018, the U.S. trade deficit with China fell until April. The differences speak to the tension that hasn’t gone away since the two leaders last met on the sidelines of the G-20 gathering in Buenos Aires in December for a dinner that led to five months of talks. They still have different conceptions of what a trade pact between them should include and clashing priorities owing to the domestic pressures they each face. Both leaders want to stand strong in a conflict likely to define their presidencies.

The U.S. is seeking sweeping reforms to Chinese policy on things ranging from intellectual-property protections to subsidies for corporate champions and a dramatic reduction in its trade deficit with China.

In May, China balked at enshrining reforms into law, arguing it would prefer to implement them via State Council directives. That marked a reversal from what the U.S. said had already been agreed. It also came in response to a refusal by the U.S. side to agree on how to remove existing tariffs on some $250 billion in Chinese goods.

Since then the U.S. raised the import taxes on a $200 billion tranche of goods and is rolling out plans to target a further $300 billion. Chinese officials have also toughened their own stand, publicly demanding a removal of all duties as a condition for any deal even as senior U.S. officials insist they won’t agree to that.

Trump has signaled he’s happy to stick with tariffs, but he’s facing growing criticism from U.S. businesses amid mounting evidence they’re hurting the U.S. economy as well as China’s. In the run-up to this week’s meeting, U.S. officials have insisted that Beijing has to bend.

China has sent its own conflicting messages. It’s leaving the door open to a negotiated settlement. But Chinese state media and government spokespeople have also blamed the U.S. for global economic uncertainties and accused it of bullying other nations. Even if the two sides find a path toward further negotiations, China is also buckling down for a long-term competition.

While China has toned down language about the flagship industrial policy program — Made in China 2025 — at the center of U.S. complaints, Xi continues to talk about the need for China to pursue “indigenous innovation” in “core technologies.”

The fight over Huawei has only intensified that focus, though it’s not clear how much Trump and Xi will discuss the fate of the company. While Trump has raised the possibility of addressing Huawei’s future in trade negotiations, he’s under pressure from both his own national-security hardliners and those in Congress not to deal anything away.

Then again, people who have worked for Trump point out that whether it’s on Huawei or on broader U.S. decoupling from China, the president is likely to be more of a pragmatist than his hawks would like.

Meanwhile, strategic issues analyst in Jakarta, Johanes Dharmana Oetoro said trade war between the United States and China will be ended at least after G-20 Summit in Japan, because trade war does not give anything advantage for both countries.

“Both China and the US will loss several revenue as the impact of trade war, because others countries could have an economic opportunity to export their substitution products which is needed by the US or China,” Johanes reiterated.

Furthermore, Johanes Dharmana Oetoro has predicting that during the US vs China trade war, its seems that China has been wining on trade war, which could be seen at the US and China’s revenue and their gross domestic brutto (Red/Bloomberg and others sources).

 

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