
US-China trade war to intensify after mid-term elections

The world should brace for an escalation in the trade war between China and the US following the American mid-term elections, that could see Donald Trump test the strength of Chinese resolution with steeper tariffs, trade experts tell GlobalMarkets.

S&P Global Ratings global chief
economist Paul Gruenwald told GlobalMarkets that the war was not really about
trade at all, at least as far as the US was concerned. “The US could reduce its
trade deficit by getting consumers to save more,” he said. “In our view, the real
issue is the structure of the Chinese economy.”
Gruenwald said the world was now starting
to get a more coherent picture about what America was seeking from Chinese
president Xi Jinping, which appeared to be a level playing field for its
companies, less state-owned enterprises and even fewer subsidies for sensitive
sectors such as tech.
He added that since these issues formed the
lynchpin of China’s economic model, “it’s not clear that Beijing will make the
concessions the US wants”.
Fitch’s global chief economist, Brian
Coulton, agreed. “If you look at the list of US demands it’s not just
limited to China’s trade policy, but the way it manages its economy,” he
told GlobalMarkets.
He believes the Sino-US dispute is a very
different animal from the one that led to the re-configuration of the North
American Free Trade Agreement (Nafta). Then the US negotiators typically played
good cop with the Canadians and Mexicans, while the US president played bad cop.
“I
don’t think the US is playing a tactical game with China to gain more
leverage,” Coulton continued. “I think distrust of China’s trade
tactics runs quite deep within the current administration and they’re looking
for some quite significant concessions.”
NEW TARIFFS
Coulton said that it would be harder for
the two sides to make a breakthrough when they were not even talking to each
other, something he noted had never happened when Nafta was being
re-negotiated.
He also concluded that “a world run by
global strong men isn’t one that’s conducive to dealing with the world’s macro,
strategic or structural challenges in a co-ordinated way”.
But a Strategic Economic Dialogue 2.0 is
exactly what China and the US need, according to Gruenwald. He feared the US
would not re-open the formal communication channels, which the Bush
administration set up a decade ago with a very different Chinese president, Hu
Jintao, who was keen to promote China’s “peaceful rise”.