Monday 17 June 2019

Will the trade talk be reopened?

The US business group is pressuring Washington to reopen the trade talk with China and end the ongoing trade war; over 600 companies including Walmart sent a letter to the US president to ask for an end of the trade war with China. China and the US are putting tariffs on each other's goods; meanwhile, India is also placing tariffs on US imports, mainly agricultural and chemical goods, and escalating its trade tension with the US. At the moment, the US wants to achieve three goals by its trade war with China. The first goal is to reduce the US trade deficit with China, the second goal is to keep its economic and political dominance, and the last goal is to take a lead in the 5G though China is already leading the 5G. 
However, the trade war also brings an economic pain for the US economy and the US population. The human cost in the US is much higher than the human cost in China; therefore, even after the tariffs, the Chinese products may still have lower prices than the US products. Under such circumstance, for many US households, they are still buying the same products but with higher prices. Furthermore, it may also hurt the US product sales as well. Nowadays, people have to admit that it is almost impossible to avoid Chinese products. So a fraction of people's incomes will be allocated to the Chinese products which they cannot avoid (meaning they cannot find a US alternative to this Chinese product), when the Chinese product prices increase, this fraction will increase, and the fraction which is spent on the alternative products to Chinese products will reduce, this can force people to look for cheaper imported goods (maybe not necessarily Chinese imports) and reduce their consumption on US products. Of course, we cannot ignore that price increase will lead to a general reduction on consumption and US companies also lose orders from Chinese companies. Therefore, a trade war with China is not good for consumers as well as US companies. 
The US president is asking for another talk with the Chinese  president at the coming G20 summit; however, China has not released its response yet. China, of course, wants to resolve the trade war; however, it does not mean China will do whatever the US requests. At the moment, both sides want to reopen the trade talk, but the main disagreement still remains and I do not think either side want to make itself seem weak. Therefore, the possibility of reopening the trade talk is still clouded.

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