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Risk of US/China trade war lives on despite both sides’ concessions

PUBLISHED: 14:08 22 May 2018 | UPDATED: 14:27 22 May 2018

Jason Butler of NW Brown. Picture: NW Brown.

Jason Butler of NW Brown. Picture: NW Brown.

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Jason Butler of NW Brown on why the concessions between the US and China may not put an end to fears of a trade war between the two superpowers.

Both sides have stepped back from the brink of a US/China trade war.

The two countries announced the US has halted plans to impose tariffs on up to $150bn of imports and China made pledges to significantly increase its purchases of US agriculture and energy exports.

President Trump’s administration has taken a strong stance against Chinese exports, saying Beijing needs to pay the price for decades of unfairly acquiring US intellectual property (IP). Washington is keen to rebalance the $337bn trade deficit with China.

The market has reacted positively to the recent announcement; but hardliners on both sides are disappointed with the change of stance.

US critics are unhappy the focus has shifted to reducing the trade deficit, rather than a harder push for reforms in China to prevent the acquisition of US IP.

In the middle of the trade negotiations is the fate of ZTE, a Chinese telecoms company that has been handed a seven-year ban on sourcing US components. The ban came in last month, after the company admitting violating US sanctions on Iran and North Korea. Chinese critics are unhappy that the fate of the company, and its 70,000 employees, has not been secured.

Whether the US can reduce its deficit with China and achieve change in the country remains to be seen, but neither will be easy.

China will expect a lifting of US restrictions on high-tech exports to China imposed in 1989 and a quick resolution for ZTE.

These negotiations are complex and the threat of them breaking down and a trade war ensuing is still present.

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