Will the U.S.-China Trade War Ever End?
Source: By Urban C Lehner, DTN Reporter • Posted: Friday, June 7, 2019
Farmers and ranchers, then, need to consider whether a never-ending trade war is likely. To help with that consideration, here are arguments for both sides of the question.
One reason to fear a perpetual trade war is the increasingly bitter edge to U.S.-China relations generally. Unlike U.S. trade conflicts with Japan in the 1980s and 1990s, with China today it’s not just trade that’s gone sour.
China expert Vincent Shih thinks China might blink first. (https://www.newyorker.com/…) His rationale? Xi Jinping has bet his premiership on economic growth. If it doesn’t continue, he’s in trouble — and he may not have the option of stimulating a tariff-laden economy, having gone to that well too many times already.
“I don’t believe some of this rhetoric that you’re seeing out of China, saying that we’re prepared to suffer great economic hardship or to continue this economic fight with the U.S.,” Shih says. “I just don’t think that is very credible, because clearly Xi Jinping would like China to continue on this trajectory of economic growth.”
Nick Lardy, a top expert on China’s economy, disagrees. (https://www.lowyinstitute.org/…) China is much less dependent on exports than Washington imagines, he says. The tariffs will slow its economy, but not so tellingly as Washington hopes. China won’t “fall apart,” Lardy says, if GDP growth is “five point something instead of six point something.”
Might Trump blink first? The American economy is even less trade-dependent than China’s, but democracies tolerate less pain than autocracies. On May 29, before Trump announced his new Mexico tariffs, the Wall Street Journal cited a poll showing 47% of Americans worry Trump’s tariffs hurt the economy, up from 38%. (https://www.wsj.com/…) The poll says 62% of Americans “are either very or somewhat concerned that the trade war with China could harm their local economy.”
You will, no doubt, decide for yourselves which of these arguments to believe. Me, I’m not convinced the trade war will never end. Trump’s nonchalance and China’s bellicosity both strike me as negotiating postures. At the same time, I think it’s going to be hard for either side to back down from the positions they’ve dug into.
Three Wall Street gurus quoted by Bloomberg say they’re adjusting their portfolios accordingly. Says one of the three, a hedge-fund manager: “This contest will be a drawn-out process that will likely last our careers.” (https://www.bloomberg.com/…)
Urban Lehner can be reached at urbanize@gmail.com
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