US-China Trade Dialog: Possible Outcomes
Recent talks between the United States and China on trade have produced no results and have even escalated the demands on both sides, increasing the chances for a trade war between the world’s two largest economies. On a brighter side, the two sides have scheduled regular meetings between Washington and Beijing on economic and trade issues, reviving the US-China Comprehensive Economic Dialogue which has been dormant for some time.
What might be the results of the current impasse? There are three possible outcomes. One is the continuation of the status quo, with presidents Donald Trump and Xi Jinping continuing their bellicose posturing, resulting in little substantive bilateral dialogue and creating continuing market uncertainty.
The two sides could also reach a compromise of some kind. This could involve Trump dropping the threat of additional tariffs on Chinese imports and China committing to economic reforms that would improve Chinese trade practices in the course of a definite time frame.
If, however, Trump goes through with additional tariffs on $150 billion of Chinese goods and the Chinese retaliate, as they surely would, a trade war could ensue.
A trade war would have no winner, most experts agree, and would produce large economic costs for the US, China, and the rest of the world.
It is a conflict that would also “likely to have vast political and geostrategic implications,” noted Marie Kasperek, associate director of the Atlantic Council’s global business and economics program, in a recent article. “The current trade dispute, combined with US policy responses, might tempt China to disrupt the United States’ diplomatic efforts in North Korea. The outcome of the current dispute between the United States and its European partners over a permanent exemption for the EU from the steel and aluminum tariffs is likely to affect the EU’s position in a possible US-China trade war.”
A trade war, in other words, would make the world a more complicated and dangerous place. And that, as Kasperek points out, “is not worth all the tea in China.”