The Trade War Should Come to An End, A Trade Deal Is Imminent
Skerdian Meta • 3 min read
The trade war between US and China started at the beginning of 2018 when US president Donald Trump announced trade tariffs on Chinese products, which came into effect by the middle of last year. As we know, China responded back with retaliatory measures on US products and since then, the trade war has only escalated. The last round of tariffs to be applied were back in June, worth $60 billion from China as retaliation of the $200 billion additional tariffs that Trump applied on China on May.
Donald Trump announced new tariffs in August, but it remains to be seen whether they will come into effect. Although, me and other market analysts are of the idea that the trade war will come to an end at some point this year or early in 2020 and a trade. There are quite a few signs that point to this, as listed below:
1. Global Economy Is Weakening
The global economy was on an expansionary period for many years until last year. By the middle of 2018, the signs that the economy was slowing starting popping up in different major economies. That was mostly due to the sentiment among investors starting to turn negative. But, as time went by and tariffs increased, the real effects started showing. This year the global economy has deteriorated considerably. Manufacturing and industrial production which has been the front line in this trade war fell in contraction in the Eurozone, China and recently even in the UK.
In the US, this sector is pretty close to contraction and it has almost stagnated. The other sectors are also suffering and we have also seen contraction in the GDP and the danger of falling into recession is imminent. The US economy showed some resilience last year, but the economic weakness has caught up there as well and Donald Trump surely doesn’t like a weaker economy.
2. They Both Want A Deal
However they try to appear in front of their supporters, both leaders want a trade deal badly. Surely, China needs it more than the US, but Donald trump is also pretty keen in striking a deal with China. After all, he is a businessman and knows that more trade among nations is better than less trade, he’s just trying to get a good bargain from China. The USCMA (previously NAFTA) trade deal between US, Mexico an Canda showed that Trump’s intentions are to get a better trading deal from trading partners across the globe.
The continues meetings and negotiations between the US and Chinese trade teams, as well as between Trump and the Chinese president Xi also show their intentions to reach a deal. Donald Trump postponed the new tariffs announced last month which should have come into effect. Perhaps, they will not be applied at all, which would mean “C’mon, let’s get the deal done”.
3. US 2020 Elections Coming Up
The last elections in the US were on November 2016. Now we are in 2019, which means that three years have gone by and to be honest, I didn’t really feel the time fly so fast across many aspects of life and particularly regarding Trump’s presidency. There have been so many events one after another, that we haven’t felt that Trump’s mandate is coming to an end soon. The next elections are in a bit more than a year and I don’t think Trump wants to start the campaign with a full on trade war, a really weak US economy and a global economy probably in recession, if the trade war continues.
So, he might continue to try and look rough against China for some more time, but he will soften the tones later, as elections approach. The postponing of the last tariffs are a good sign of this. China on the other hand is begging for a deal, so I assume we will see a trade deal between the two giants soon. The next round of negotiations are in October and both parties have had quite a long time off to reflect. Those negotiations will shed some light on where both parties stand, but i have a gut feeling now that they are standing closer than even since Trump came to power.