Macroscope | How US, China can defuse the trade war and boost global growth
- If the renminbi continues to falter, Washington and Beijing could join forces with official intervention to ensure exchange rate stability is maintained
- Opening up China’s markets to more US exports to encourage faster bilateral trade flows would also help
The world is crying out for help and there is so much more the US and China can accomplish by coming together with a speedy resolution to their dispute. Without effective intervention, global recession could be on the cards.
Long-term trend growth above 4 per cent for the world economy is still possible but only with the right policies in place. A much bigger global fiscal stimulus push and a detente over trade can definitely help.
In 2018, the US-China trade deficit had reached a record US$418 billion, even after the imposition of trade sanctions by former US president Donald Trump in January that year. There was a brief respite with the trade gap narrowing to US$310 billion in 2020 due to the pandemic, but with world trade flows returning to normal in 2021, the deficit is rising again – hitting US$355 billion last year.