The US president Trump triggered a trade war China to achieve the clear objective of securing a new trade deal with China. The objective was to strike a new favourable trade deal with China to reduce the trade deficit and to increase the American exports. This trade war raised serious questions and concerns about the prospects of world economy and world trade.
The good news is that both US and China now on the brink of striking a new trade deal. The world markets welcomed the possible trade deal as shares surged half year high. The devastating trade war between the world’s two largest economies seems coming to an end for the moment. Both sides have been engaged in talks and negotiations since the beginning of the trade war last year.
The leading American newspaper The Wall Street Journal has reported that the US and China are in the “final stage” of completing an agreement, “with Beijing offering to lower tariffs and other restrictions on American farm, chemical, auto and other products and Washington considering removing most, if not all, sanctions levied against Chinese products since last year”.
The American international news agency” Reuters” reported that US President Donald Trump and Chinese President Xi Jinping could seal a formal trade deal in March during the official visit of Chinese president to US. Both leaders expected to close a deal at a summit with at Trump’s Mar-a-Largo estate in Florida.
If a deal finalised during Chinese president’s visit to US then it would bring an end to a year-long trade war which has seen tariffs imposed on over $350 billion worth of goods, roiled financial markets, disrupted supply chains and provoked fears the actions could exacerbate a wider slowdown in the global economy.
This trade deal will boost the standing of president Trump who is facing legal investigations and criticism. It will be a sigh of relief for both countries. American media is saying that “An end to the US-China trade war, even if only temporary, would be a major win for President Xi and his government, who have been trying to counter a slowing down economy”.
But everything hasn’t been agreed yet. There are issues that need to be settled to achieve a sustainable trade deal. Both sides will have to offer concessions to each side to satisfy the domestic concerns.
Some US media outlets are reporting that “there have been some signs of disagreement inside the Trump administration about whether the time is right to make a deal with Beijing”, and while the proposed deal would roll back tariffs on both sides of the Pacific, “it may do little to achieve the substantive changes to China’s economy that the United States initially set out to win”.
As the Bloomberg News reported that one of the final sticking points in the negotiations is how soon US tariffs on Chinese goods would be lifted. “The US wants to continue to wield the threat of tariffs as leverage to ensure China won’t renege on the deal, and only lift the duties fully when Beijing implemented all parts of the agreement”.
But Chinese wants to see the duties and tariffs lifted immediately to stop the slide of the economy and to reenergise it. The gradual lifting of US duties and tariffs on Chinese goods will not help the Chinese economy in the way, Chinese government wants it.
There are two possible outcomes from US-China trade talks: a cosmetic deal that papers over the cracks or a credible deal. At the moment, the most likely scenario seems to be a cosmetic deal. The world economy and global markets needs a boost and any sort of trade deal between the two largest economies in the world can provide that boost in the short term. Some sort of deal is expected during the summit. How far both sides can go on the trade deal is still to be seen.
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20 June, 2019