Expected, Intensify US-China Trade War
Prospects for enduring trade relations between the United States and China are still foggy. By the turn of 2018 there were pointers that the US-China trade war will intensify this new year.
Analysts say insufficient progress on key issues will likely lead President Donald Trump to raise tariff levels on Chinese imports. Likely, the administration may impose tariffs on an additional $267 billion of Chinese goods—encompassing essentially the entire value of Chinese imports in 2017.
American government delegation will however, travel to Beijing in the first week of the new year to hold trade talks with Chinese officials. Insiders say Deputy US Trade Representative Jeffrey Gerrish will lead the team, which will also include Treasury Under Secretary for International Affairs David Malpass.
Chinese Ministry of Commerce spokesman Gao Feng confirmed that the two sides planned to sit down for talks this January, although he did not provide a date for the meeting during his regular briefing in Beijing last Thursday.
The meeting will be the first face-to-face discussion the two sides have held since President Trump and China’s Xi Jinping agreed on a 90-day truce in Argentina this past month. Treasury Secretary Steven Mnuchin had said the previous week the US team and its counterparts have held discussions over the phone.
The meeting adds to signs that the world’s two largest economies are making progress in cooling trade tensions. Beijing this week announced a third round of tariff cuts, lowering import taxes on more than 700 goods from Jan. 1 as part of its efforts to open up the economy and lower costs for domestic consumers.
Chinese and American officials have been in constant contact since the meeting in Argentina, but China isn’t exactly clear on the specifics of what the US wants, according to two people in Beijing with knowledge of the talks. China wants the US to remove the punitive tariffs that have been imposed and not add new ones, but suspects the US will ask for more before it agrees to do that, the people said.
Capital market watchers say US stocks extended gains on news of the talks. The S&P 500 Index rose 4.96% as of 4 p.m. in New York, after falling within two points of a bear market earlier in the session.
Trump has agreed to put on hold a scheduled increase in tariffs on some $200 billion in annual imports from China while the negotiations take place. He is pushing the Asian nation to reduce trade barriers and stop alleged theft of intellectual property. Beijing so far has pledged to resume buying American soybeans and to at least temporarily lower retaliatory tariffs on US autos.
While it’s positive that US trade representative will be leading the delegation, the two sides are not on track to make the kind of large-scale breakthrough that the Trump administration is seeking, according to Derek Scissors, a China expert at the American Enterprise Institute.
“The failure of cabinet-level officials to even meet in the first half of the 90-day period makes it impossible to anticipate fundamental change on the Chinese side,” he said.
Trump said after returning from his South American meeting with Xi that US Trade Representative Robert Lighthizer would be in charge of the China talks. Lighthizer, who isn’t scheduled to join the delegation in China, left no wiggle room for the two countries to extend talks beyond 90 days, saying this month that March 1 was a “hard deadline” that was endorsed by Trump.
“When I talk to the president of the United States he is not talking about going beyond March. He is talking about getting a deal if there is a deal to be done in the next 90 days,” Lighthizer told CBS on last December 9.
But Trump and other members of his trade team, including National Economic Council Director, Larry Kudlow, have said they could further delay an escalation in tariffs if the two sides made sufficient progress.
Expectedly, an emerging markets credit crisis will unfold this 2019. China which is owed around 20% of African nations’ external government debt, will not have its debts due by the end of the year serviced, and its role as a major creditor to emerging and frontier markets will diminish.
Pressure on emerging markets will also mount as the US Federal Reserve increases interest rates and the dollar strengthens. And despite a recovery in the prices of commodities, which are fundamental exports and serve as the foundation for many emerging market economies, currency depreciation for many exporters will prevent these countries from climbing their way out of systemic volatility.
In the mean time, intra-African cooperation and economic integration will accelerate in 2019. But while Africa will become more connected than ever in 2019, each of these efforts will require concerted commitments by African Union member states to realize the long-term gains of improved economic connectivity.