Editorial | Damaging trade war will slow, not stop, the growth of China
- Washington has underestimated the ample policy responses available to Beijing, and it is to be hoped Xi Jinping and Donald Trump can achieve positive results in Osaka next week
Liu, the nation’s chief trade negotiator, was making a keynote speech at the Lujiazui financial forum, a high-level annual event run by the Shanghai government and the People’s Bank of China. With trade, both sides are playing a game of chicken. But if the goal of Washington is to push China to speed up reform and opening up, especially on market access, fair competition and protection of trademarks and intellectual property, it is pushing at an open door.
Sadly, US chief negotiator Robert Lighthizer is the trade version of hawkish US national security adviser John Bolton. Both think seeking an adversary’s capitulation is the goal of negotiation. No wonder the trade talks broke down. The draft agreement from the US had tried to make Washington the sole judge, jury and executioner on whether China had followed the terms, while Beijing would not be allowed to retaliate or seek redress from the World Trade Organisation. The American government could deny access to Chinese investments but China could not do the same.
There is no doubt that rising American tariffs will hurt the Chinese economy, and some analysts have warned that economic growth could slow to 6 per cent this year. But economists and investors should not focus solely on monthly data that might show signs of weakness; they should, perhaps more importantly, gauge the more positive trends that sustain long-term growth. The trade war may slow down that trajectory, but will not stop it.