Tit-for-tat tariffs and then truce

Barrister Muhammad Zamir writes for DOT : 
Nineteen leaders of the world’s biggest economies and a representative of the European Union recently met in Buenos Aries, Argentina during the Group of 20 Summit which started at the end of November and crossed into December.
All eyes were on a range of issues, including a high-stakes meeting between US President Donald Trump and his Chinese counterpart Xi Jinping. This meeting attracted particular attention of world markets and economists. They are now wondering as to whether new doors have been opened after G 20 Summit, 2018.
It may be recalled that the world’s two largest economies – the US and China – have been locked in an escalating trade battle for the last two years. This emanated from the US President complaining about China’s trading practices even before he took office in 2016. Since then he has been aggressively targeting Beijing as part of his broader America First agenda. In 2017, the US launched an investigation into Chinese trade policies and has since then steadily imposed tariffs on Chinese products.
So far, the US has imposed three rounds of tariffs on Chinese goods, totalling more than $250 billion and they cover a wide range of consumer and industrial items including handbags, rice and railway equipment. The duties range from 10% to 25%. Mr Trump has also threatened to hit another $267 billion worth of goods – meaning all Chinese imports could be subject to tariffs.
Beijing has also struck back. It has accused the US of starting “the largest trade war in economic history” and imposed tariffs on $110 billion worth of American goods. In this context China’s list of products subject to levies – range from 5% to 25% – includes chemicals, coal and medical equipment. Chinese moves have been strategic, targeting products made in Republican districts of the US and also goods- soya beans – that can be purchased elsewhere. Analysts have pointed out that tariffs, in theory, make US-made products cheaper than imported ones, and encourage consumers to buy American.
US President Donald Trump and his Chinese counterpart Xi Jinping have now agreed to halt new trade tariffs for 90 days to allow for talks. The two met in Buenos Aires after the G20 summit for their first talks since a trade war erupted this year.
Global policy makers and investors were hoping that President Donald Trump and his Chinese counterpart Xi Jinping would reach a ceasefire in their turbulent trade war that has sparked global market turmoil. However, the outwardly positive agreement between the leaders of the world’s two economic superpowers to halt further escalation in tariffs and continue negotiating to reduce trade imbalances — hailed by Trump as “an incredible deal” — was seen by many US-China experts as another punt by the two countries in a year-long trade negotiation that leaves unresolved deep issues between the two countries.
The agreement between on the sidelines of the G20 summit in Argentina set up yet another deadline by the Trump administration to broker a deal with China to address top US concerns like forced technology transfer, intellectual property and cyber-theft within 90 days.
It has however been observed that the critical difference was the omission in China’s statement of any agreed upon timetable for negotiations. Also absent was specific mention as to whether China would be inclined to open up critical markets like- agriculture, energy and industrial US products. The one area of shared agreement between the two countries was on fentanyl, a substance that has been tied to an epidemic of overdose deaths in the United States, which been a top priority issue for the Trump administration. After years of negotiations China has finally agreed to designate the synthetic opioid fentanyl as a controlled substance – meaning sellers would be subject to the maximum penalty under the law.
Two powerful trade lobbies in Washington — the US Chamber of Commerce and the Business Roundtable — which represent companies like Walmart Inc., Target Corp., and Procter & Gamble Company have welcomed the decision by the US Administration to set aside applying further tariffs as the “right course of action.”
However, analysts have cast doubts as to what might be achievable over the next three months, suggesting it would be unlikely for both sides to reach a substantial breakthrough ahead of the next deadline.
It will also require China to set down a fresh starting point for negotiations in the weeks ahead as Beijing celebrates the 40th anniversary of reform. It is being speculated that this important anniversary could offer Xi an opportunity to lay out a clear vision for a new wave of liberalization on his own terms based on the country’s own needs and political schedule.
It needs to be remembered at this point that the trade war between the world’s two largest economies has been a major risk factor for investors this year. Analysts have pointed out that it has threatened economic forecasts for countries across the Asia Pacific region. Consequently, the world is now looking for connotations in their inter-action. The personal chemistry between them appeared to have briefly become the source of discovery of common denominators within the matrix of diametrically opposing viewpoints.
Both China Daily and Chinese international broadcaster CGTN have in the meantime reported that Trump and Xi have agreed not to impose new tariffs after 1 January. This is being seen as a form of reprieve for President Xi who has been grappling with a slowing economy at home. Analysts have observed that Xi was under pressure to come home with some sort of a deal that would not only exert less pain on Chinese manufacturers but also the language of which would be vague, and non binding with regard to how much Beijing has to open up, or how much it will have to buy from the US.
Others in North America and the EU have indicated that this postulate was applicable for both as the economic and trade superpowers needed to appear as strong within their domestic arena.
Muhammad Zamir, a former Ambassador is an analyst specialized in foreign affairs, right to information and good governance, Email: muhammadzamir0@gmail.com