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US-China trade war
Opinion
David Brown
David Brown

Macroscope | US-China trade truce is needed to lift the global economic gloom

  • Recent signs that the punishing tariffs in place for several years may be reviewed have brought hope
  • On top of easing trade tensions, China’s shift towards nurturing domestic consumption should also be complemented by a renewed US focus on manufacturing

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A cargo ship sits at PortMiami in Miami Beach, Florida, on June 9. The US trade deficit with China peaked in 2018 at US$418 billion and went down to US$310 billion in 2020, but is now rising again. Photo: Getty Images / AFP
David Brown
There are glimmers of hope that an end to the US-China trade war is in sight. At least officials in Washington and Beijing seem to be talking again and it could be a precursor to a much needed easing of trade tensions between the two countries.

A resolution is long overdue and it could pave the way for better relations and stronger bilateral trade flows. With global economic confidence on the back foot, it’s the moment when the world’s biggest powers could heal their differences and put the needs of the global economy first.

A quick-fix trade deal could provide a much needed stopgap when global recovery risks being badly undermined by the Ukraine war, higher inflation and the shock of more aggressive interest rate tightening. A global recession would be thwarted if the US and China could set in motion a stronger global recovery.
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The slowdown in world trade after former US president Donald Trump imposed sanctions on China in January 2018, and Beijing responded with countermeasures, probably knocked around 1 per cent off global growth potential, leaving the world economy badly exposed before the Covid-19 crisis struck in 2020.

Once again, uncertainties are piling up, global growth is slowing and world trade flows are at risk. It’s crunch time and the US and China have an opportunity to stabilise the situation.

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The latest data, for March, from the Netherlands’ Bureau for Economic Policy Analysis shows that global trade momentum slowed fairly sharply in the first few months of 2022. The annualised rate of world trade growth, a moving average over three months, reached only 3 per cent in March, compared to 13.2 per cent annualised growth as recently as January.

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