Trade Dispute Between U.S. and China: Who Will Suffer From What?

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There are signs that U.S President Donald Trump and Chinese President Xi Jinping are not eager to lose face in the ongoing trade dispute between the two countries. The United States and China are the two largest economies in the world, and a trade dispute between them is sure to have negative impacts on other nations. But since both leaders are not willing to back down for the other, who blinks first in the current standoff?

Business and political analysts say unless they both concede for each other, the ongoing trade conflict can last for several months or years.

Considering that the US has a strong economy, analysts say President Trump may not back down anytime soon unless he gets a good deal with China. Clete Williams, a former White House trade negotiator said Trump might hold out for as long he can. This is possibly because analysts see China losing in the end if both countries do not come to a mutual agreement.

“President Trump is not planning on backing down on this issue until he gets a result that addresses the long-standing, unfair trade practices the Chinese are engaging in,” said Clete Willems. “President Trump is going to see this one through until the end.”

China Is In a Weaker Position, but the United States Is Not Exempt From Being Impacted Too

The G-20 summit comes up next month in Osaka, Japan and both Trump and Jinping are billed to attend. It is hoped that the summit will provide both leaders with another opportunity to iron out their differences and come to a deal agreeable to both. Incidentally, Trump sees himself as in a stronger position than his Chinese counterpart and believes he has an upper hand in negotiating deals.

Following trade negotiations last weekend, Trump increased tariffs to 25% on Chinese goods of $200 billion. He is also looking to hike tariffs on all Chinese importations for another $325 billion. In reprisal, China said that starting June 1, they will hike tariffs on $60 billion of American importations, a move that will impact several American interests within the country. Michigan, Ohio and Wisconsin are states that can ensure that Trump gets re-elected in 2020, but the China raising tariffs will harm medium companies and farmers in these states.

If the trade conflict significantly affects the United States, it could force Trump’s hand for quick deal. However, considering that Trump is lifting tariffs on aluminum and steel from Canada and Mexico as well as delaying tariffs on cars for another six months, he can decide to hold out for much longer against China in the light of these initiatives. Trump is also confident that the US will not be impacted much in the light of unemployment remaining below 4% and GDP rising by over 3%.

Trump Are Jinping Are Friends, But This Does Not Extend To National Trade Deals

Anabel González, a senior fellow at the Peterson Institute for International Economics and a former top World Bank trade official, both Trump and Jinping are not making it easy for themselves to strike a deal. Yet, many experts believe China will lose more since it depends on more US imports than US does Chinese imports, while Jinping continues to contend with multiple factions within his own government.

While trades worth $600 billion exchanged hands between the US and China in 2018, China owes the US over $1 trillion – a debt that further puts the communist country in a weaker position against America. And then, former White House chief strategist Stephen Bannon and trade adviser Peter Navarro think China is getting too threatening and must be dealt with in a decisive manner.

All things being equal, Trump said his personal friendship with Jinping might make the latter to backtrack on certain things. But analysts say national trade agreements go beyond personal relationships.

 

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