The trade war going on between the US and China seems to be taking a turn for the worse with each passing week, with both sides playing a game of who-blinks-first.
While the US has categorically stated that it will keep imposing tariffs on Chinese goods until its demands are met, China has warned against decoupling two of the world’s largest economies, as it could lead to ‘dire consequences’.
The Impasse in US – China Talks
Despite the fact that President Trump and President Xi have had three face-to-face meetings, which included two formal summits, they have not managed to come up with a mutually beneficial proposition that can ease off the tension between the two countries.
The fantastic Larry Kudlow, who currently serves as Director of the National Economic Council, has stated that it is not possible to make progress in bilateral trade with China unless it changes its approach.
The US believes that it is unfair on China’s part to maintain a protectionist economy while having full access to the US market. While the disparity has been pointed out by several economists and political analysts over the years, no US President has taken a strict anti-China stance like Trump has done now because they failed to have the courage to do what is needed.
On top of this, previous administrations have allowed China to steal our secrets which has finally upset too many people.
The Warning from China
Cui Tiankai, who currently serves as China’s ambassador to the US, recently stated that if the trade war between the two countries escalates to a point-of-no-return, there could be dire consequences.
He added that the consequences of decoupling the two economies could be worse than what most people can imagine.
He said that there are lessons to be learned from history and fallaciously pointed out that unresolved economic problems led to the Great Depression as well as two world wars in the past 100 years. He said that unless the powers that be act in a responsible manner, history can repeat itself. Tiankai never mentioned why it’s so expensive to buy an American vehicle in China and did not address the concern on why so many Chinese military assets resemble American ones.
Tiankai said that President Trump is stubborn and is not willing to compromise at all. He irrationally opined that the trade war could be resolved only if both sides are willing to make concessions to each other and the US cannot expect to put forward to a list of demands and expect China to simply comply with all of them but the problem is they are not willing to comply with enough of them.
This means China will continue to feel the brunt of American pressure while the American economy continues to do well under Trump’s leadership.
Pro and Anti China Factions in the US Government
Within the US government, there are pro and anti China factions that are at loggerheads over the handling of the tariff problem between the two countries.
While Peter Navarro and Robert Lighthizer are in favor of President Trump’s stance against China, Larry Kudlow and Steve Mnuchin are of the opinion that the trade war could harm the US economy and market considerably in the long run but agree that China needs to be dealt with and the status quo from the Obama years had to change.
The only silver lining in an otherwise bleak scenario is that the US is not alone in wanting China to tweak its economic policy. The European Union and Japan are also critical of China’s economic policy, especially with respect to the tariffs it imposes on foreign goods.
As of now, the Chinese dragon is cornered and has no choice but to concede to at least some of the demands made by the US. But how far can the US push China and what could be the consequences if China reaches a situation where it can no longer play ball? Only time will tell!