Fear remains despite improvement in US - China trade war

Saturday, 2018-12-15 11:52:48
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Tension in the US - China trade war has been temporarily lifted, but concerns remain. (Photo: Reuters)
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NDO – Tension in the US - China trade war has been temporarily halted after the leaders from the two sides agreed on a pause in order to actively discuss the negotiation process. However, "subterranean waves" remain strong in the bilateral relationship and analysts continue to worry that the trade war between the world's leading economies will have a major impact on the global economy next year.

Earlier this month, US President Donald Trump and China's President Xi Jinping agreed that the US would temporarily not raise import tariffs from 10-25% on China's US$200 billion worth of goods starting from January 1, 2019.

China has taken the first steps of a "trade ceasefire agreement" with the US. On December 13, a spokesperson from the Chinese Ministry of Commerce confirmed that China is planning to send a delegation to the US to discuss trade issues.

Earlier, Chinese Deputy Prime Minister Liu He made phone calls to US Secretary of the Treasury, Steven Mnuchin, and US Trade Representative, Robert Lighthizer, to discuss the roadmap for the next phase of the bilateral trade negotiations.

In another good-will move, also on December 13, the Chinese side decided to buy at least 500,000 tonnes of US soybeans. Earlier, in an interview with CNBC, US Commerce Secretary Wilbur Ross also confirmed that China had reduced its import tariffs on US automobiles and resumed imports of US soybean products.

However, while the US and China have agreed on a “ceasefire” in the trade war and Beijing has made remarkable moves to cool down the strained economic relationship with Washington as mentioned above, analysts are not yet optimistic on the prospects of the two great powers soon ending the trade war.

Speaking on Fox Business TV on December 13, White House Trade Adviser Peter Navarro said that his country would hold "tough" talks with China. He emphasised that the US needed to hold fast, stay tough, and focus on the prize, with the key principle of "trust but verify." China's early concessions to trade negotiations with the US could not guarantee a settlement, he said, as Washington urged Beijing to boost imports from the US.

US Trade Representative R. Lighthizer, who is in charge of trade talks with China, said in an interview with CBS, that March 1, 2019, was the "hard deadline" for reaching a trade deal with China to prevent a widespread trade war between the two.

In addition, while the US and China are preparing a trade negotiation path, "subterranean waves" are still taking place in the relationship between the two leading economies. The most notable incident was the case of Meng Wanzhou, chief financial officer of China's Huawei Technology Group, who was arrested by Canadian police in Vancouver and faces the risk of being extradited to the US on charges of violating the US sanctions against Iran.

Tension escalated as Chinese Foreign Ministry Spokesperson Lu Kang announced on December 13 that Chinese officials had taken coercive measures against two Canadians on suspicion of jeopardising China's national security. Analysts say the incidents are deepening the conflict between China, Canada and the US, adding fire to the tensions in the US-China trade relationship.

The unsatisfactory prospect of the US-China trade talks is one of the major reasons that international organisations are concerned about the global economic future in 2019. The majority of economic reports published at the end of 2018 all stated that the trade war will lead to a slowdown in world economic growth. The UN Economic and Social Commission for Asia and the Pacific (UNESCAP) released its latest report on trade and investment in the Asia Pacific in 2018, saying that the escalation of the US-China trade tension and reduced consumer confidence could cut the global gross domestic product by US$400 billion and Asia Pacific's GDP down by US$117 billion. The UNESCAP report is also concerned that the trade war has had a major impact, leading to disruptions in supply chains and stirring worries among investors.

Concerns are rational, as the prospect of ending the trade war is not bright, despite the temporary suspension by both the US and China. In order to minimise the damage and not be highly affected by this trade war, it is now time for each country to actively fight against trade protectionism and build its own suitable development scenarios in 2019 as well as in the following years.