News between Beijing and Washington DC seems to be all bad in recent days as the two trade combatants have gone back and forth trying to up the pressure to force the other to back down. On the surface, it may seem like there’s no end in sight. But what we’re really seeing is a prelude to a deal. It’s less like a game of chicken and more like a display of brinkmanship by both nations to appear to their respective nations that when the deal is made, their side is the one that got the upper hand.
News that Asian markets are tanking following President Trump’s announcements of harsher tariffs last week is actually a mixed bag. On one hand, this level of financial turmoil in Asia is a bad sign for China. On the other hand, the devaluing of the yuan causes further problems for President Trump’s tariffs as it improves China’s selling power, partially cancelling out effects from tariffs.
BREAKING: Asian equity markets tank and the Chinese Yuan hits an 11-year low after President Trump ramps up trade war with China by imposing more tariffs on more than half-a-trillion dollars worth of imports https://t.co/IEunOBMdX7
— Ryan Saavedra (@RealSaavedra) August 26, 2019
But between tariffs and the plummeting yuan, China is also in an extremely precarious position. They continue to increase their own tariffs against American imports. This will have an impact on many American businesses, but not even close to the negative impact on Chinese businesses. The longer this trade war goes, the harder it will be on the overall Chinese economy. As our EIC noted, we do not need China nearly as much as they need us.
Will China continue to be stubborn in hopes that the Democrats will win the 2020 election? If the Democrats do win, would it be Bernie Sanders or Elizabeth Warren who have both been proponents of tariffs on China since well before President Trump announced his run for public office?
Perhaps the answer to these and other questions are already coming in through backchannels:
Chinese Vice Premier Liu He said on Monday that China is willing to resolve its trade dispute with the United States through calm negotiations and resolutely opposes the escalation of the conflict, a state-backed newspaper reported.
Liu, China’s top trade negotiator, was speaking at a tech conference in Chongqing in southwest China, the Chongqing Morning Post reported.
The comments come after U.S. President Donald Trump last week announced an extra 5% duty on some $550 billion of Chinese goods, the latest tit-for-tat move announced hours after China unveiled its retaliatory tariffs on $75 billion worth of U.S. products.
This is no longer a question of whether China will back down. It’s a matter of seeing if they’ll wait for the 2020 elections. But there are doubts they can survive the trade war that long. A deal may be coming sooner rather than later.
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