Opinion | An end to the US-China trade war is the world’s best hope for long-term pandemic recovery

As global growth slows, the US must increase government spending and taxation, while China can pick up the remaining slack through heavier investment spending

Most importantly, though, a return to strong US-China bilateral trade would do much to restore economic confidence

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The US-China trade war began in July 2018, leading to tariffs on some US$550 billion of Chinese goods and US$185 billion of US goods. The phase-one trade deal signed in January 2020 has now expired, leaving the two countries at a stalemate in negotiations. Photo: Shutterstock

Published: 3:30am, 11 Jan 2022Updated: 3:57am, 11 Jan 2022

With global growth expected to lose momentum this year as many of the world’s central banks wind down monetary super-stimulus and step up their fight against inflation, the US and China will need to find new resources to sustain confidence.

But with US President Joe Biden’s US$1.8 trillion economic regeneration programme still stalled in Congress and the US Federal Reserve leaning towards tougher monetary policy, will it fall to China to be the saviour for global growth in 2022?

With China’s stellar export performance starting to cool and consumer morale lacking gusto, an investment-led approach might be the answer for ramping up mainland recovery.

One solution which would have immediate effect for global growth this year would be for the US and China to settle their differences over trade and clear the way for faster bilateral export flows. With clear signs that world trade is slowing, a breakthrough is needed soon.

The world still needs to get past the worst of the pandemic before global economic confidence is fully restored. The US outlook continues to improve after a reasonably positive non-farm payrolls report for December, spelling more good news for consumer confidence as more Americans head back to work.

Headline payrolls only rose by 199,000 in December but overall net gains were boosted by upward revisions of a further 141,000 jobs to the previous two months.

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