The smallest of openings in the US-China trade war has appeared, potentially signaling a break in tensions between the two nations.
The US and China called a small ceasefire in their trade war. But the standoff isn’t over.
“It suits both governments to have a bit of a breather right now,” an expert said.
On Wednesday, Beijing released a list of 16 American products — such as livestock, grease, and cancer drugs — that would be exempt from new tariffs until September 2020. That won’t make a big impact on the US economy, but it looked like a promising sign headed into planned US-China trade negotiations next month.
Then on Wednesday night, President Donald Trump seemingly reciprocated with his own “gesture of good will.” In two tweets, he announced the two-week delay of a 5 percent increase in tariffs, from 25 percent to 30 percent, on $250 billion of Chinese goods originally scheduled for October 1. According to the president, he made this move at the request of China’s Vice Premier Liu He and also because the first day of next month is the 70th anniversary of the founding of the People’s Republic of China.
Again, it’s not much, but it shows that Trump is willing to lessen some of the pressure in the trade war that he started.
However, Treasury Secretary Steven Mnuchin claims that Trump’s move is all part of a dealmaking strategy.
“The president is a negotiator. And he is prepared to keep these tariffs in place, he’s prepared to raise tariffs if we need to raise tariffs,” he told CNBC on Thursday. He could do a deal any time. But he only wants to do a good deal.”
So do Wednesday’s actions mean this is the beginning of the end of the trade war? Likely not.
“It suits both governments to have a bit of a breather right now”
Jacob Kirkegaard, a global trade expert at the Peterson Institute for International Economics, told me that Beijing and Washington have yet to fundamentally change their overall stances on the trade war. China is fine striking a small deal with the US — reducing tariffs so it can buy large amounts of products again — while America wants the “big deal,” amounting to a complete restructuring of the trade dynamic between the two nations.
Which means the small reduction in tensions this week doesn’t necessarily change the situation. But it does indicate both countries are eager for a slight and momentary reprieve.
China is struggling with unrest in Hong Kong and has the anniversary celebration coming up, Kirkegaard said, while noting “Trump faces a slowing economy” and needs “people to stop talking about a recession.” This small ceasefire, then, gives both sides a needed break.
“I think it suits both governments to have a bit of a breather right now,” Kirkegaard said.
It’s unlikely the US and China will strike a comprehensive trade deal by the end of Trump’s first term, experts say, because officials in Beijing don’t trust Trump as a negotiating partner. They’re more likely to wait to see if Trump loses in 2020. Should he win, though, China may be forced to come to some sort of agreement with the president — or the destructive trade war will continue well into the future.
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