The China/US’ trade war’ took a somewhat unexpected turn this week as the current US administration more than doubled tariffs on $200bn of Chinese goods last Friday. What impact might this have on public support for President Donald Trump in the United States with the 2020 election on the horizon?
It all looked so promising recently when the Chinese Vice-Premier Liu He visited the US and confirmed in an oval office meeting with President Trump that his country would be making an astronomical order of one million tonnes of US agricultural produce (namely soybeans) to be purchased by state-owned Chinese firms as a goodwill gesture. However, since then Mr Trump has referred to the recent tariff increase as “very bad for China” but “very good” for the USA. He has also further drawn attention to the history of China “taking advantage of the US” as he frequently did on his 2016 campaign trail. In a similar confrontational fashion, a Chinese Foreign Ministry spokesman said China would “never surrender to external pressure”.
This sharp escalation comes as the two parties failed to reach an agreement on trade by the deadline last Friday. President Trump had previously seemed optimistic of reaching a trade deal with China dubbed ‘the biggest deal ever’. This as several key figures from both sides spent months negotiating a deal in a series of well-publicised visits. However, talks appear to have broken down with the US introducing these new tariffs and China responding with counter-tariffs as expected.
The counter tariffs are on $60bn of US goods exported to China, which is an apparent retaliation by Chinese president Xi Jinping. This move appears to have again increased tensions between the two nations and extended the bilateral trade war beyond June 1st when the counter-tariffs are due to come into effect. The counter-tariffs will affect US imports of Chinese goods including; beef, lamb and a variety of vegetables. This, coupled with the top economic adviser to the president Larry Kudlow saying, “both sides will suffer” from the dispute, puts Mr Trump’s reasoning into question. More pressingly, the tariffs are likely to have a detrimental impact on the general population in the US, at least in the short-term. So, for the time being, the policy is unlikely to be popular amongst voters.
Of course, he would tell you that he is playing the long game and attempting to win the trade war to reduce or even eliminate the gaping trade deficit that the US currently has with China. This was a central promise of the Trump campaign during the 2016 election and would bode well with the electorate should he successfully provide more favourable conditions for both producers and consumers in the US. Whether he is successful in this ambition or not remains to be seen.
Some may suggest that this move is an attempt by the current US administration to besmirch China’s reputation within the international community. For instance, the recent Huawei 5G scandal in the UK along with the controversy around the UK government awarding a Hinkley Point power station contract to a Chinese corporation shows a unanimous lack of trust in the Chinese state throughout the West, a precedent set by the Trump administration and Mr Trump’s rhetoric.
(Project Syndicate, 2018) Trump has been persistent in his claim that the two leaders have an “extraordinary” relationship, but tensions between the two superpowers extend beyond trade to issues such as China’s encroachment in the South China Sea, Taiwan and allegations of espionage.
In my opinion, Republican leader Donald Trump is likely to retain the presidency in 2020 and thus have a second term in the White House to implement his campaign pledges. However, I also feel that the issue of the trade deficit with China and bringing this fierce trade war to a mutual conclusion are crucial to his success in the election. Therefore, this issue is the major hurdle for Trump to overcome in order to retain the presidency. This further makes it an area of weakness for likely Democratic Party candidate, former vice president Joe Biden to explore should he win the candidacy. Some may give Biden a better chance of victory due to his extensive experience campaigning for and serving in the Obama administration. However, I would disagree and believe Donald Trump will successfully manipulate the direction of conversation during the upcoming campaign to create a battle of charisma and personality, similar to the one that helped win him the debates and ultimately the presidency in 2016.
Putting these occurrences into perspective, this economic-aggression between the two largest economies in the world appears to be escalating. It involves the largest economy (the US) attempting to deny the increasing supremacy of the world’s largest exporter (China). The global impacts of this include the US markets reacting to the move in a negative fashion with the NASDAQ shedding 2.3% just minutes after opening on Monday. The global impacts are also evident with the FTSE 100 down 0.5% in Europe.
Whatever your affiliation, it is clear to me that these occurrences and the impacts of them are ugly; having a detrimental effect on the global economy. However, with the rhetoric appearing to worsen – there seems to be no end in sight. Therefore, it is evident in my opinion that not only is a trade deal between these two superpowers essential for global economic stability and growth; but it is to be crucial for Donald Trump’s domestic ambitions. It is less likely to impact President Xi in any significant way domestically due to the one-party system in China; however, he may still be under some pressure to draw a line under this saga from within his own ruling Communist Party. As a result, I would suggest that this latest spate of aggression is a long-term ploy by both governments to reach a deal that may favour them in future years.