By Hallum Cowell
President Trump and President Xi Jinping are still yet to agree to a new trade deal as the economic battle between the United States and China continues.
After numerous rounds of negotiations in 2017, a truce agreed in December 2018 collapsed in May this year. This came about after the US increased tariffs on US$200 billion worth of Chinese goods entering the US from 10% to 25% after 11 rounds of negotiations yielded no progress.
A few days later, China announced that it would increase tariffs on US$60 billion of US goods from June 2019. Since then, tensions have continued to increase.
Both countries have since announced further tariff increases, and on September 5 2018, China retaliated by halting the purchase of American made farming equipment. This was particularly notable as it dealt a significant blow to one of Trump’s key voting bases.
Wendy Cutler, a former US trade negotiator and current Vice President at the Asia Society Policy Institute said: “The US-China trade talks are in serious trouble, there is less and less trust on both sides, coupled with a growing sense in both Washington and Beijing that they may be better off without a deal, at least for the time being.”
This year in early August, Donald Trump announced on Twitter that after China did not adhere to its commitments made during negotiations “…the U.S. will start, on September 1st, putting a small additional Tariff of 10% on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already tariffed at 25%.” In response to this, the value of the economic markets fell.
On August 6, the Chinese yuan sunk to its lowest value against the US Dollar in 11 years, consequently, the US Treasury labelled China a ‘currency manipulator’ for the first time since 1994. The Treasury accused China of doing this to gain an unfair advantage in international trade to undercut the US, an accusation which the Bank of China refuted.
As tensions continued to rise, on 6 August the Chinese Government retaliated by halting the purchase of American made farming equipment. This was a particularly symbolic decision as it dealt a significant blow to one of Trump’s key voting bases.
Critics of President Trump’s actions also argue that the tariffs on Chinese goods hurt the US more than China. The US Chamber of Commerce, which represents over three million US companies, said that the latest tariffs on China “will only inflict greater pain on American businesses, farmers, workers and consumers, and undermine an otherwise strong US economy.”
China’s Foreign Minister Wang Yi similarly criticised the tariffs by stating: “Adding tariffs is definitely not a constructive way to resolve economic and trade frictions, it’s not the correct way.”
On a wider scale, the international community is also feeling the impact of the volatile trade talks. The International Monetary Fund has announced that it expects trade to slow across the globe this year, for the second year running. Meanwhile, many central banks are cutting interest rates in an effort to cushion the expected economic downturn.
Both countries claim that they would like to come to an agreement, although they would be willing to fight a trade war if it were necessary. With US tariffs expected to be imposed on 1 September and trade talks expected to continue in the near future, China has urged the US to “meet each other halfway.” Although, whether any progress will be made in the next round of negotiations, remains uncertain.