The End of Us-China Trade War or the Start of the New World Pattern?
After a working dinner at the G20 Summit in Buenos Aires on the first day of the last month of this year, as the US and China agreed to refrain from increasing tariffs and imposing new ones for 90 days until March 1, 2019, the US-China Trade War seems to draw a temporary ceasefire. But who is the winner in this war? Or did the war actually really come to an end? Or rather, did the ceasefire mark an emergence of the new world pattern in which the US and China are at the heart of world polarization?
Let’s first recall the timeline of the US-China Trade War. During Trump’s presidential campaign, he had criticized China’s trade practices for “raping” US and “stealing” their interests. On August 18, 2017, the United States Trade Representative launched an investigation of certain policies and practices of the Chinese government, those relating to technology transfer, intellectual property and innovation. The 25 percent tariff impose on all steel imports and a 10 percent tariff on all aluminum imports signals the declaration of the trade war. After the release of the list of $50 billion products subject to a potential 25 percent tariff by the USTR, China responded by proposing 25 percent tariffs on 106 products such as soybeans, automobile and chemicals. If this round and the following attack on ZTE were the warm-up stage, the implementation of the first China-specific tariffs declared on July 6 which collects a 25% tariff on 818 imported Chinese products with $34 billion worth and China’s retaliatory 25% tariff imposition marked the escalation of the trade war and the rest of the world began to experience the tension. After three rounds of tariffs along with the cancellation and resume of trade talks, US and China agreed on a 90-day truce on December 1st after the G20 meeting despite previous pessimistic attitudes expressed by experts from both sides.
What brought the ceasefire to the table? Probably like what Martin Wolf said, there is no winner in any trade wars. Considering the current political and economic power dynamic in the world, if not “win-win”, the consequences of any war are devastating for both sides. Trade is disrupted, the long-standing stability of the trading system is destroyed, the Sino-US diplomatic relations are damaged. Due to the economic and political tension caused by the trade war, a number of US companies in China suffered a great loss. For example, Qualcomm, US chipmaker, failed to acquire Dutch rival NXP Semiconductors because China declined to grant it regulatory approval. On China’s side, the “new export order” subindex which shows China’s export sector’s health dropped sharply by 0.4 points to 49.4 after Washington threatened additional tariffs on Chinese products, marking a unprecedented export downturn in two years. Not only were the two superpowers hurt by the war, the rest of the world suffered. Trump was ignorant when he expected an easy win to the trade war; China was certainly not a “push-over” and Trump overestimated US power and the domestic support for his reckless actions.
What’s after the ceasefire of the trade war? For 3 three days after the ceasefire, the global market seemed to recover after the cold winter. Dow Jones futures, a metric for evaluation of current economic conditions and especially, the relative strength of the U.S. economy, jumped 1.65% vs. fair value. S&P 500 futures raced 1.35% higher. Nasdaq 100 futures ran up 2.2%. on Dec 3. However, Canada’s sudden arrest of the global chief financial officer of Huawei, the Chinese tech giant, on Dec 5 will undoubtedly ruin the efforts made in the G20 summit, as proved by global stock’s slump to 8-moth low. According to the US Justice Department, the arrest was “part of ongoing investigation.” The US side has long suspected that the Chinese government could be using the Huawei networking technology to spy on Americans, posing a national security concern. The hope of a peaceful ceasefire is killed in its cradle.
Not to mention Trump’s next target and future actions, as the world could infer from the sudden crash of oil price targeted at Russia and Trump’s previous attitudes towards EU, now it could be the last-minute silence before the start of a global panic.
Edited by Urvi Agrawal.
Sources:
http://www.china-briefing.com/news/the-us-china-trade-war-a-timeline/
https://www.ft.com/content/155f0ab0-c558-11e8-8670-c5353379f7c2
https://www.cnn.com/2018/12/05/tech/huawei-cfo-arrested-canada/index.html
https://www.politico.com/story/2018/08/31/trade-war-chinese-economy-exports-805564
