China and US need to keep talking as threat of global recession looms
- Mixed signals from Donald Trump only add to trade war confusion and increase economic uncertainty both in America and the rest of the world
The annual Group of Seven meeting, which ended on Monday, offered US President Donald Trump a chance to build some kind of united front behind his trade dispute with China, ahead of his disclosure that after yet another round of punitive tit-for-tat tariff increases, Beijing and Washington had been in touch about further talks.
However, amid nervousness among America’s allies that the trade war may tip the global economy into recession, Trump sent mixed signals that only created fresh uncertainty. In the course of a day, he retreated from a threat to order US firms out of China, said he was having “second thoughts” about a new round of tariffs on Chinese goods – interpreted as a softening – and then backflipped again, saying second thoughts meant he regretted not having raised tariffs any higher. It was typical Trump negotiating style, which still owes more to real estate salesmanship than statesmanship.
He capped it all by praising Xi Jinping as a “great leader”, as he confirmed that Beijing had contacted Washington for further talks, only days after labelling the Chinese president an enemy. At the same time he welcomed a call for “calm negotiations” to solve the dispute from China’s top trade negotiator, Vice-Premier Liu He.
Despite his rhetorical gymnastics, Trump did not go unchallenged at the G7, with new British Prime Minister Boris Johnson saying, provocatively, his country had profited massively from free trade and favoured trade peace. This resonates with criticism by Trump’s political opponents at home, who say failure to work more closely with allies to change China’s course has done nothing to strengthen America’s hand in the trade war.
In the latest tariff increases, Beijing raised levies on US$75 billion worth of US goods in response to planned levies on an additional US$300 billion worth of Chinese imports. Then Washington said it would raise duties from the current 25 per cent to 30 per cent on US$250 billion worth of Chinese goods on October 1, and from the previously planned 10 per cent to 15 per cent on the remaining imports of US$300 billion on September 1.
Criticism from American consumer trade organisations is growing, as Trump’s tariffs disrupt business planning, destroy farm export markets and roil stock markets. Needing a victory to bolster support, Trump announced that the United States and Japan had “agreed in principle” on a deal to avoid a trade dispute that would prise open Japan’s protected agricultural markets.
But it will take more than bilateral deals to undo the damage to free trade and global economic confidence wreaked by the US-China conflict, particularly with Beijing having pledged to fight to the end. So long as the two sides keep talking, however, there is hope of avoiding the potential disaster of a global recession.
