US – China Trade Deal: Is the End of the Trade War in Sight?

US - China Trade Deal: Is the end of the trade war in sight?

Martijn Rijk

19/12/2019

Martijn Rijk
Marketing Manager

The United States and China have signed a first-phase trade agreement earlier this week. This is potentially a big step in the right direction. Potentially, as the latest deal is just a small step and in no way guarantees an end to a trade war which has had a big effect on global trade.

The trade war has brought uncertainty to both the American and the global economy, with a negative impact on business investments.

A Deal, But What’s In It?

But details of the agreement hailed by President Donald Trump as “phenomenal” still remains largely unknown, leaving close US-China watchers to describe it as “He said, Xi said,” and others wondering what exactly is included in a limited agreement among the economic superpowers.
“We don’t have a document, and until we have a document, we don’t know what’s in the agreement,” said Craig Allen, president of the US-China Business Council. “I wouldn’t hold your breath. It might take a while.”
The rush to finalize a deal in the last two weeks comes as the President is confronting the prospect of impeachment while seeking to boost his chances of re-election in 2020 with the help of farmers, a key constituency, who his trade war has hurt the most.

Read more in this article by CNN.

A Deal at a Price

“It’s hard to see this China deal as the vindication of the president’s tactics,” said Edward Alden, a senior fellow at the Council on Foreign Relations. “It’s a pretty small deal, coming at a pretty high cost.”

To persuade China to bend to American demands, Mr. Trump imposed more new tariffs than any other president in modern history. On Friday, Mr. Trump announced that he would not go forward with an additional tariff increase planned for Sunday and that he would lower the rate on some of the tariffs he had already placed on China.

Read more in The New York Times

The phase one deal is more of a big purchase agreement than a real trade deal, FP’s Keith Johnson explains. “In other words, the likeliest outcome after two years of expensive tariffs, bankrupt farmers, and nervous markets is that the United States might just be able to get back to where it was in the last year of the Obama administration,” he writes.

Read more in this Foreign Policy article.

A Shift of Battle Fields?

Politico warns that China may be changing course moving from a Trade War to a Financial War…

The largest problems facing U.S.-China relations, from emerging technology to the crisis in Hong Kong, remain unresolved. And a careful reading of the conversation inside China suggests that the next front line of the U.S.-China conflict may already be taking shape, with an ominous name: Financial war.

Many members of the Chinese elite, even longtime advocates of market reform and economic opening, see a dark future for U.S.-China relations—and they are increasingly focused on America’s global financial hegemony as a long-term risk for their country. They’re indicating, subtly but unmistakably, that they see global finance as a rising theater of conflict, and are considering new ways for China to defend itself and even to retaliate.

Read the full article here.

Will the Trade War be Widening?

William Pesek is warning about a widening trade war in his article on Nikkei Asia Review:

It also is a reminder that Washington’s deal with Beijing is merely the calm before the Trumpian storm to come. Trump is raring for another go at China — and the rest of Asia, to boot.

This puts multinational companies in an impossible position. On the one hand, decisions about investment, staffing, capital raising, where to source materials from or where to manufacture goods have rarely been harder.

Any CEO who thought Thailand might be a good refuge from the trade war now has to reconsider. The same goes for multinationals moving production from China to Vietnam, another place Team Trump is threatening with levies and currency-manipulator labels.

Read more here.

We will keep you up to date on further developments. Keep an eye on our news page, or follow our LinkedIn page for regular updates on import, export, global trade, and other customs related developments.

Photo by Suzy Hazelwood from Pexels