Global trade at risk as US-China trade deal remains elusive

The recent trade talks between Washington and Beijing was something that was followed closely by the international community, and its negative outcome has disappointed many. However, both the sides are optimistic that a trade deal will be reached in the near future.

The Chinese regime is apparently irked by President Donald Trump’s aggressive stance on the issue – including the demand that Beijing get its act together to stabilize the domestic economy – and is not in a mood to give in to the pressure. China blamed the failure of the talks on US’ wrong actions and ruled out a resumption of the dialogue until Trump changed his ways.

UNEXPECTED OUTCOME

The re-escalation of the tension, after a long gap, came as a surprise, for it defied the expectations of an improvement in the ties amidst the positive signals sent out by the two economic giants. With Trump once again assuring of a “deal” in the near term, some economists expect that to happen by next year. After taking his rhetoric against China to the peak this month, Trump is likely to tone down considering the presidential election to be held next year. Similarly, China would not want to play with heightened economic uncertainty in the present situation.

The re-escalation of the tension, after a long gap, came as a surprise, for it defied the expectations of an improvement in the ties

Nevertheless, neither of the leaders feels a sense of urgency to patch up their differences, and the reason is that the respective economies have been able to withstand the tariff woes, so far. The US economy is going through one of its most buoyant phases ever and China is witnessing a recovery from the recent slump.

Blaming China for going back on its promises, Trump also surprised everyone by hiking the tariff on Chinese goods worth $200 billion to 25% from 10%. The reaction from the opposite side was quite expected – Beijing increased duties on US products worth $60 billion.

A GLOBAL ISSUE

Meanwhile, there is an apprehension that a further escalation of the conflict will be detrimental not only to the economies of the US and China but also to those of the other nations. Also, if the status quo is maintained for too long, the scope for an amicable resolution will diminish. Moreover, its negative effect on investor sentiment might lead to a slowdown in the market.

As far as a resolution is concerned, there are also political interests to be safeguarded, in addition to the economic ones, including China’s disputed territorial claims. At this point, the last thing the Asian giant would want to do is to change its policy on Taiwan, Tibet, Macau, and Hong Kong.

China also feels that the US has gone a step too far by asking it to make structural changes to the economy and foreign policy, which the latter refers to as “core interest”. As of now, the reservations of Xi Jinping and team about tweaking the fundamental economic structure could be a bottleneck in reaching a trade deal.

Related: Huawei launches offensive, suing the US government for ban

FLASHBACK

Rewind to March 2018: the US government imposes hefty tariffs on steel and aluminum imports, exempting a few of its friends, apparently targeting China from where the majority of the raw materials reach the US. The reason – Trump wanted to stop Chinese companies from infringing on patented US technologies and make sure that US corporates get a better deal in the Chinese market.

For long, the state-owned enterprises of China are being accused by their foreign counterparts of enjoying undue benefits in the form of the heavy subsidies and sops offered by the government. Since most of those entities operate in the telecom, defense and power sectors, the ramifications of the alleged patent infringements would be severe.

China has a policy that denies foreign enterprises sufficient access to its market, despite the liberalization efforts being made by the country, which is also a member of the World Trade Organization.

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