The economic reality will force can-be Washington and Beijing to agree

La réalité économique forcera peut-être Washington et Pékin à s’entendre

Photo: Fred Dufour Agence France-Presse
China and the United States, the two largest economies, are the “main engines of the world”, highlights Song Lifang, an economist at Renmin University in Beijing. This makes the dispute “a matter not only for the two countries, but also for the whole world,” he adds.

The concern of the markets and some signs of economic weakness could force the government to Trump and China to falter in the face-to-face business between them in the last six months.

The import taxes imposed by each of the two parties to hundreds of billions of goods of the other — and the threat of increasing these rates — have increased the anxiety of both sides of the Pacific ocean. Most of their trade war will last a long time, more businesses and consumers will be hard hit by rising prices of imports and exports.

During this time, the chinese economy is slowing down. In the United States, many are expecting the year 2019 more difficult for the economy, and these difficulties could be intensified by the extension of the trade war — what fear the financial markets. Yet, according to analysts, these same pressures may eventually convince the two countries to agree.

“The United States and China now have a strong common interest to conclude an agreement in order to put an end to the downward spiral of business confidence and investors, who have tarnished their economies,” said Eswar Prasad, professor of trade policy at Cornell University.

Wang Yong, an international relations specialist at Peking University, believes that the economic threats “could be conducive for negotiations” by encouraging Beijing to operate in China, changes in favour of the market economy is that long-standing aim of the United States.

Escalation of the tension

However, it will not be easy to bridge the complex differences between the two largest economies in the world. This is the president’s insistence Donald Trump as China buys more u.s. products to the affirmations widespread view that Beijing is stealing trade secrets of foreign companies active in China.

The negotiations between the two countries are expected to resume next week. Gao Feng, a spokesperson of the chinese ministry of Commerce, said last week that the two parties had “made specific provisions for meetings face-to-face” and talked on the phone. Mr. Gao gave no other details, and the office of the us Trade representative has refused to confirm the existence of these talks.

The rest of the world follows the folder with anxiety. China and the United States, the two largest economies, are the ” main engines of the world “, underlined Song Lifang, an economist at Renmin University in Beijing. This makes the dispute ” a matter not only for the two countries, but also for the whole world “, he added.

The conflict is “a major factor” in the slowdown of global growth, said Mr. Song, and a regulation would help to halt the decline of the economies of the two countries and the world.”

Mr. Trump complained since a long time for the heavy trade deficit of Usa with China : the gap between what Americans have sold and what they bought in China in 2017 amounted to 336 billion and will probably be higher in 2018. But the dispute extends well beyond the imbalance of exports and imports. The United States accuse China of deploying tactics and predatory with the goal of exceeding the technological supremacy of american.

To try to compel China to reform, Washington has imposed duties on chinese imports of a value of 250 billion US$; Beijing has responded with tariffs on 110 billion US $of u.s. assets. Mr. Trump was ready to raise tariffs on most chinese goods on the 1st of January. But he agreed with the president Xi Jinping to a truce of 90 days to attempt to resolve the dispute.

Back on earth

Since then, the arguments in favour of a resolution strengthened as the economic risks in the United States and China increased, and as the financial markets collapsed. In 2018, the average Dow Jones industrial — the benchmark index of the stock market the more in view of the United States — has fallen by almost 6 %, its worst performance since 2008. The composite index and the chinese Shanghai, for its part, dropped by almost 25 %.

In addition to the concerns raised about the collateral damage of the trade war between the United States and China, investors on the us markets are concerned about rising interest rates and instability of the u.s. real estate market. The international monetary Fund considers, moreover, that the chinese economy has recorded a growth of about 6.6% in 2018, down from 6.9% in 2017. However, the heavy public spending have masked the weak activity in the private sector. In December, the plant activity has declined for the first time in more than two years.

Despite the slowdown of its economy, China will likely have difficulty in complying with the request of the United States to slow down its economic ambitions. These ambitions are fuelling the desire of China to become the global economic superpower of the Twenty-first century.

“It is difficult to resolve the commercial dispute immediately, because the u.s. requirements are too high, in particular those aiming to change economic and social systems of china “, noted the economist, Song, Renmin University.

Wendy Cutler, a former negotiator for u.s. trade, has said that the United States would likely be nothing less than an agreement signed by Beijing to reform its way of doing business. “There are certainly compelling reasons for the two parties to reach an agreement and avoid further increases in rates,” said Ms. Cutler. “Without a strong agreement that addresses the structural problems, the government, the critics say : “You’ve taken us in a trade war for this ?” “

Share Button