Hopes of reconciliation hang in the balance as Trump hardens his stanceby George Magnus / May 7, 2019 / Leave a comment
It may have been coincidence, but then again perhaps not. President Trump tweeted out of the blue his impatience with the stalling trade talks with China, and threatened to resume the trade war this coming Friday, putting an end to the momentary “ceasefire.”He chose to do so on the weekend that China was marking the centenary of the May the Fourth Movement.
This anniversary, carefully orchestrated by the Communist Party, and specifically excluding open and public displays, remembers the protest movement that railed against China’s treatment at the hands of foreign powers at the Versailles peace conference and from which the Communist Party emerged two years later. For the US to time its threats to China as Trump has done will not sit well with Beijing’s policymakers.
The current talks to ease trade tensions were agreed at the G20 Summit in Buenos Aires late last year, and were supposed to have been concluded after 90 days on 1st March, but they were extended as it appeared that progress was being made. The US agreed to shelve the proposal to raise punitive tariffs on $200bn of imports from China from 10 to 25 per cent, and to desist from recommending such tariffs on the half of imports not yet subjected to them. With that, and the longer the talks continued, the more the leverage shifted to Beijing.
For most of the last five months or so, there was never really much doubt about the low-hanging fruit in these talks. Namely that China would agree to step up purchases of US agricultural goods, energy and aircraft, for example, and confirm other existing broad agreements about opening up some financial services to US firms, and possibly lifting ownership caps in some firms or sectors where there was little challenge to Chinese firms. It’s in more contentious areas that meaningful agreement was always going to prove hard or impossible, and it seems like this is where we now are.
As a result, Trump has brought full-on trade tariffs back into play, and imminently.
Chinese markets certainly didn’t like the turn of events. The Shanghai Composite stock market index fell by over 5.5 per cent, and the Yuan, which normally oscillates by minuscule amounts day to day, fell by over 1 per cent. All of this despite the announcement by the People’s Bank of China of a targeted lowering in bank…