Trade tariffs may not be the powerful weapon that America thinks it is
With trade tensions between the US and China flaring up again, the spotlight is on how their game of mutually assured disruption plays out. As China had pre-existent problems, it may seem more vulnerable.
In the three months till the end of September, China’s economy grew just 4.8%, its weakest pace in a year. It could have been worse had a temporary trade truce not been struck earlier this year; Chinese exports to the US are down but not out. But with Beijing’s rare-earth clampdown having provoked a fresh US threat of an additional 100% tariff, relations have soured again.
Both sides are probably looking for a new bargain. While China is still haunted by its property sector slump and weak local demand, it may have stronger cards than the US does. Market wobbles in response to a trade snap-off do not worry the political dispensation in Beijing, while the White House has shown sensitivity to investor woes.
Also, Beijing has crafted export curbs of variable intensity that can be calibrated to let the US plausibly claim a win that isn’t really one. China may also have a back-up stimulus plan to spur domestic demand in case exports sag. Tariffs, it may turn out, aren’t too useful a weapon.
Post Comment