trade tariff

On August 1, the US trade negotiating team returned to Washington from Shanghai. US President Trump released Twitter, saying that Washington will impose a 10% tariff on Chinese goods worth US$300 billion from September 1.

This also means that from September 1st, all goods exported from China to the United States will be subject to a 25% or 10% tariff. It is believed that China will immediately issue a reciprocal tariff on goods exported from the United States to China. As a result of the standard judgement, the China-US negotiations on July 30-31 in Shanghai can be described as collapsed.

However, it may not be. After 12 rounds of negotiations and two “study sessions”, China and the United States finally completed their moves and found out the mutual enthusiasm. The China-US trade negotiations began.

Donald Trump said on Twitter on August 1 that our trade negotiators had a constructive dialogue with China and signed an agreement toward the future. However, we thought that we had reached an agreement with China as early as three months ago. Unfortunately, China decided to renegotiate before signing. He also said that China agreed to buy a large amount of US agricultural products, but it has not been realized. In addition, Chinese President Xi Jinping once said that it would prevent the export of the opioid analgesic Fentanyl to the United States, but it still has not been done, resulting in many US People are killed. Negotiations are still going on, and the United States will start on September 1 and impose a 10% tariff on small amounts of Chinese goods involving US$300 billion. “We look forward to continuing an active dialogue with China and finally signing a comprehensive trade agreement. We also believe that there will be a bright future for relations between the two countries.”

Unexpected new tariff

However, the market is not so bright. Influenced by Trump’s Twitter, the US stocks dive in the middle of the session. The Dow opened higher and once rose 310 points. It eventually fell 1.05% to over 280 points, at 26,583.42 points. The S&P 500 fell 0.9% to 2,953.56 points, while the Nasdaq fell 0.79% to 811.11 points. The CBOE Volatility Index (VIX), which measures the market panic index, rose more than 20%. Most of the Chinese stocks closed lower, and financial stocks closed down across the board. Hong Kong stocks and A-shares are also in the same situation: the Hang Seng Index opened lower by 2%, and blue-chip stocks fell across the board. The Shanghai Stock Exchange fell 1.63% and lost 2,900 points. On the contrary, it was once considered by some as “China’s counter-attack against the US”. rise.

The market reaction is justifiable: since the China-US negotiations were “unhappy” in May this year, the representatives of the two countries exchanged several calls, and Xi Jinping and Trump also held talks in Osaka, Japan. The outside world has high expectations for the Shanghai negotiations that have finally restarted. When the White House and the Chinese Ministry of Commerce all said after the negotiations, “this round of negotiations is constructive,” and it is agreed that the officials of both sides will communicate closely in August, and the negotiators will meet again in September. This should not be a “disruption”. Look like that.

But Trump finally decided to impose tariffs. What will happen to the plot?

The US gives up unrealistic fantasies

For the content of the negotiations, neither China nor the United States will disclose too much, and the outside reports are sporadic and one-sided, but based on these known contents, we can comment on the overall plot of the negotiations.

There is a big premise that has not changed in more than a year: what the United States wants is a “big agreement” in which China makes obvious concessions. China is naturally unacceptable for such a demand for China’s sovereignty and to curb China’s development. What China can accept is to increase the import of US goods under the condition that the US offers a reasonable price. This is a “small agreement” to temporarily resolve disputes by buying and selling.

It is conceivable that during this round of negotiations in Shanghai, China still has no concessions for the “big agreement” that the US wants. Even when the United States puts on a “you will not impose concessions, we will impose tariffs” attitude, the Chinese response is still “it is not concession for me, and it is better for us to continue to impose tariffs on each other.” .

It should be said that this week’s China-US negotiations were prepared from the beginning towards the “small agreement.” The addition of China’s Minister of Commerce, Zhongshan, and the preparation of orders for US goods such as soybeans and pork are all prepared for the preparation of specific goods trading orders for the “small agreement”.

For such a result, the US also had expectations at the beginning: At the beginning of the trade war more than a year ago, the US believed that it could make compromises through tariff threats, and even hostages and technological restrictions such as Meng Zhouzhou and Huawei. . However, after more than a year of negotiations, the United States has gradually figured out China’s bottom line, namely the three principles that China’s Vice Premier of the State Council and the Chinese leader of the China-US Comprehensive Economic Dialogue, Liu He said in May this year: The tariff must be abolished; second, the procurement figures are realistic; third, any country has its own dignity and the text of the agreement must be balanced.

As for the “great agreement” that the United States wants, although Trump said on July 1 that the two countries must reach an agreement favorable to the United States, they cannot “five-five”, White House economic adviser Larry Kudlow and US Trade Representative Robert Lighthizer and others also said they would not accept the so-called “balanced agreement” because the current state of trade between China and the United States is very uneven – but the United States also realizes that this is unrealistic. The basic consensus of the two teams in this Shanghai negotiation is that “a small agreement can be reached to suspend the smoke and the goods are available for payment. The negotiation of the big agreement will continue in the future.”

In other words, after more than a year of negotiations, China and the United States finally gave up unrealistic fantasies. This week’s Shanghai negotiations are the real starting point for China-US negotiations.

Unexpected Trump

To this end, you need to talk about another cause: Trump.

For the outcome of the Shanghai negotiations, Trump is certainly expected, and China is unlikely to make concessions to the “big agreement.” However, after listening to the report of the returning team, it is conceivable that Trump is quite unscrupulous. The idea of “China is so hard” and “I need to do something” must have been in the heart of Trump. . The new tariff of $300 billion is also the result. Even so, Trump is too inconvenient to make too much of a fire, thus making up the “small tariff”.

Trump has always been this kind of thinking. After all, he has established an image of “preserving a dominant position in China-US negotiations” for the American nationals and the world. The image set up needs to be maintained; after all, he has always been This kind of bargaining, the character that has repeatedly changed. This is all within expectation.

However, this new tariff undoubtedly violates the consensus reached by the China-US team in Shanghai. For this reason, it is believed that orders for soybeans and other goods prepared by the Chinese for the “small agreement” will also be cancelled. Trump himself said on Twitter, “China has not fulfilled its commitment to purchase agricultural products.” In fact, looking at Liu He’s previous three conditions, China’s procurement commitment has always been linked to the US’s elimination of tariffs.

It is because this new tariff violates the consensus of the China-US negotiations and believes that the US team is hesitating. According to the “Wall Street Journal” quoted by people familiar with the matter on August 1, most of the White House aides opposed the decision, including Wright Heze, Treasury Secretary Steven Mnuchin, Kudlow, and even the most hawkish attitude toward China. John Bolton, a national security adviser, has only supported Peter Navarro, a trade consultant who wrote The Deadly China. According to Bloomberg News, Mnuchin suggested to Trump that he would inform Beijing at least before deciding to impose tariffs, but the proposal was rejected by Trump, and then Trump sent the Twitter.

Added: Light Emerson spokesman Jeff Emerson should report that Lighthize supported the president’s actions.

Therefore, the situation of the China-US trade war will still be mutual pull. The attitude of the Chinese side will still be “fighting, always accompanying; talking, opening the door”, and the “full agreement” negotiations that the United States wants today. China and the United States have really completed the trick. What will be tested next is the economic and social heritage of the two countries and the strategic strength of the two governments.

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