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US-China negotiation on ongoing Trade war: A sign of future agreement?


Sonia Asif | Ahmad Hassan:

Donald J. Trump, since he sworn into the office, has not shied away from taking any decision for the fulfillment of his presidential campaign’s promises. Initiating trade war with China is one of those bold steps. On 22 March 2018, tariffs on imports of Chinese goods of worth US$50 billion, were imposed by Trump administration by calling it “a response to the unfair trade practices of China over the years.” China retaliated with imposing tariffs on imports of same worth from the US. Since then they, US and China are indulged in an ongoing trade war. This trade war is also an indication of the growing concern of US for increasing US-China trade deficit and china’s ambition for economic hegemony.

Although the US shared a list of 142 items to talk with China on trade-related issues in May last year, the main concerns of US are weak intellectual property

rights laws of China, undervaluation of Chinese currency by state, subsidies by China to its industries to enhance exports, and technology theft by forcing joint-venture

of foreign companies with local companies. The US is off the point of view that China through these malpractices is seeking economic hegemony. China has completely negated these allegations. Moreover, to appease this ongoing war of tariffs, China has also pledged to open up its market more by placing more liberal policies and providing

level playing field to foreign business. But, in the past, such promises were also made but never kept. Therefore, it will be a challenge for both the US and China to agree upon on enforcement mechanism of those liberal market policies this time.

As both the US and China, are suffering from this economic trade war but China wants to resolve it as soon as possible and has iterated this will many times. Recently, in G20 Summit both countries agreed on “90 days truce”.They have agreed that no country will impose any more tariffs on each other than already in position, in this time period. Moreover, they will also negotiate to reach an agreement to end this war. If no deal was agreed between US and China by the time the truce period will end, then Trump has warned China for 25% tariffs on extra US$200 billion imports. Trump is using this as pressure tactics to comply with China with his will. However, how much benefit will be secured from this is still an unanswered question.

Moreover, a trade war between the US and China is not only going to affect these two countries but World economic growth will also have a setback. World Bank has

revised the prediction of Global GDP growth rate from 3% to 2.9% for the year 2019. This is mainly because of the ongoing trade war between the top two economic powers

which account the 40% of World GDP and 20% of total World Trade. If the war continued then the more severe negative trends on the World economic growth are inevitable.

Three days meeting a week ago in Beijing, between Chinese and United States officials have shown a ray of hope as the meeting end on a positive note. Beijing

agreed to initiate some of the reforms on the concerns raised by the US. It has shown willingness to ease restrictions on foreign investment by devising new laws for protecting of intellectual property rights and easing the ways for foreign companies to open local bank accounts. Although China has not shown a will to negotiate

foreign exchange rate of the Chinese currency, positive progress in negotiation is expected as both agreed to meet again in this month for carrying out further negotiation.

The successful negotiation will be a win-win situation for not just US and China but also for the rest of the world. To keep the wheel of World economy rolling, World needs its top two economic powers to work in coordination and not in a row with each other.

References:

1) https://investigatemidwest.org/2018/11/16/timeline-u-s-china-trade-war/

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