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Opinion | Donald Trump won round one of the trade war. In round two, China has the upper hand
- The US may have succeeded in forcing a relocation of supply chains from China, but now that the damage has been done, the Chinese are in no hurry to clinch a deal. Not so for Trump, who has an election to win amid signs of a slowing US economy
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Since the US-China trade war started in March 2018, the two countries have been slinging tariffs at each other in between the 12 rounds of negotiations. With the next talks scheduled for early October, it is natural to wonder whether one side or the other has won the epic battle’s first phase.
President Donald Trump had two primary goals: to cut the US trade deficit with the world, with China in particular, and to force the relocation of supply chains and production out of China to weaken its long-term economic power.
For their part, the Chinese have been mostly playing defence, with their main objective to minimise damage to supply chains that have taken decades to build, while maintaining access to the US market. Because of this difference in aims, it has been in the interest of the US to delay the signing of an agreement, while China showed a strong desire to do an early deal, but to no avail.
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Based on the results so far, Trump has largely won Trade War 1.0. There has been substantial relocation of production out of China, damaging its supply chains, though the American trade deficit with the world has continued to grow.
As we enter Trade War 2.0, it is now the Trump administration that is more eager to make a deal; China is no longer in a hurry.
In the first seven months of 2019, US imports from China shrank to US$260.5 billion, a decline of US$36.6 billion, or 12.3 per cent, over the same period in 2018.
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