The View | Business leaders must push back on US-China decoupling and demand de-escalation of trade tensions

With the agreement on a limited deal to halt the trade war, we may finally be seeing a de-escalation between the United States and China. Under a phase-one trade deal, both sides committed to halting further tariff hikes, giving business leaders time to take stock of the damage and begin planning.

Both countries have been battered by the trade war. Under pressure from tariffs, Chinese exports to the US fell 12 per cent year on year in the first half, hurting Chinese businesses and American consumers alike. It is easy to forget that trade with China has made Americans richer by making the products they buy cheaper. A recent study found that China’s entry to the World Trade Organisation led to a 7.6 per cent reduction in manufacturing prices in the US. As tariffs go back up, American wallets have started to feel lighter.

US businesses are hurting too, with exports to China falling 19 per cent. Beyond the immediate pain, there could be long-term consequences for US exporters, who are losing market share in agriculture, energy and even timber, with US hardwood exports to China in June half what they were a year prior. Meanwhile, Russian timber suppliers have gained ground in China, threatening to supplant American exporters in the long term.

Investors are also less certain than ever. Bilateral direct investment flows are down nearly 70 per cent since 2016. Little wonder, since the US is opening investigations into long-completed cross-border deals, such as the acquisition of Musical.ly by TikTok’s owner ByteDance. New rules are tightening foreign investment in emerging technologies. Some are even calling for greater restrictions in cross-border flows of stocks and bonds, just as China has put the liberalisation of its capital markets into higher gear.