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Trump plays "a chicken game" on Chinese trade, economists say



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BACKGROUND [14659003] 14. May 2019, 15:29 UTC

By Martha C. White

President Donald Trump defended his trade policy on Tuesday trying to calm the fear that an economically devastating trade war with China could be on the horizon.

"We can enter into an agreement with China tomorrow before their companies start to leave not to lose US business, but the last time we were close they wanted to renegotiate the deal. No way! We are in a much better position now than any deal we could have made, "he tweeted early on Tuesday.

The market seemed a little confused by his claim that a trade with China could still realize, rebounding something Tuesday morning after all three main indices closed Monday significantly.

International trade experts say reality is that the two sides seem to have fundamentally different priorities, which could make a deal difficult – especially with heated rhetoric on both sides. "In order for this debate to actually stop, both parties must make concessions," said Monica DeBolle, a senior guy at the Peterson Institute for International Economics. But at the moment, it is not clear that each side has a way forward to do so.

Although Trump has made much of market access for US products, especially agricultural products, corporate America focus has always been on more fundamental points on intellectual property rights and protectionist Chinese financial and regulatory policies that benefit domestic industries at the expense of US companies.

"We understand that the differences between the two governments still relate to how changes will be made to China's laws and regulations on a number of issues and enforcement," said Doug Barry, US-China Business Council spokesman. "China is out of the world standard for all these issues, and China's policies hurt all its trading partners."

This is a conclusion that legislators have more or less mentioned themselves across parties, but a decision remains unmanageable. Multilateral enforcement strategies that could have exerted strong pressure on Beijing were incorporated into the Trans-Pacific partnership, but by rejecting the agreement, the Trump administration knocked out one of its most promising levers to influence Chinese policy.

"American companies will do business in China, but there is a huge difficulty doing business there, and this trade war is about trying to make China a more compatible member of the World Trade Organization," said David Lindauer, an economics professor. at Wellesley College. "This trade war is really about creating a system where US companies can trade in China without any fear. Protection of IP is high on the list. The Chinese are notorious for producing counterfeit goods, reverse engineering or requiring technology transfers," he said. . "There is a lot of espionage in China [which] seems to be state aid, and the Americans would like to see this limited and those who violate the system are punished."

But the United States may have to adjust its expectations or dig in for a long-term battle, DeBolle said. "Currently, the United States wants China to do much … especially about intellectual property," she said. "The problem here is for China, it's about their long-term strategy and their long-term development goals," as the Made in China 2025 initiative emphasizes high-tech manufacturing.

How long it could take to solve is someone guess. China is more at stake since exports make up a larger share of the economy, but there are political considerations in the US that can complicate negotiations.

Strategies that could have pushed Beijing were built into the Trans-Pacific partnership, but Trump's administration threw out one of the most promising levers to influence Chinese politics.

"As for a timetable for all this … I don't think it takes so long," said Dom Catrambone, CEO of Whitford Asset Management. He pointed out Trump's suggestion that he could meet with Chinese President Xi Jinping at the G20 summit in June and China's target date on June 1 to implement retaliation rates. "If you think about how long it takes to get the product from China to here … they all know they have a few weeks to figure out something," he said. "I think there will be some sort of resolution within a few weeks."

Other experts are less optimistic. "Much of this right now is Trump and 2020 and his bid for re-election and his sense of having the rhetoric of" I was tough on China. "I also don't see the US supporting anything, which means it can take a while," DeBolle said. "It could be politically complicated for Trump very, very fast."

If Monday's routine In shares signals the start of a protracted crisis of confidence, Trump could give China what it would promote its political ambitions. "President Trump 100 percent will see how far he can take it, but he doesn't want my economy to be hurt because one of the only ways President Trump holds room for next election is if the economy do it really well, "Catrambone said.

In line with recent market volatility, current and future costs indicate pick up. Goldman Sachs analysts claimed higher prices as "full" of US households and companies in a recent note, and Morgan Stanley analyst Michael Wilson warned that a wholesale escalation of tariffs on all Chinese goods imported by the United States could trigger a recession . Even Trump's National Economic Council Director Larry Kudlow admitted that "both sides will suffer from this" in a Sunday interview.

"There is no doubt. As in any war, both sides are hurt by this. American consumers are hurt when prices go up. American consumers bear the cost of tariffs," Lindauer says. "I think the US administration will feel under enormous pressure for a decision," he told NBC News.

"In trade wars it is very often a chicken game, and who will blink first," he said. [19659023] Martha C. White is a contributor from NBC writing on business, finance and finance.


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