Economic Policy Economic Policy
by Jon Harden on June 25, 2019

US China trade talks, trade wars and economic growth

The relationship that the US has adopted towards some of its allies and rivals have been rather strange over the past couple of years. Seemingly in constant flux, the US has been looking at the countries that it has had a stable relationship with seemingly in a different light every week. Recently, there have been talks and mentions of potential trade wars between the US and Europe, which have caused many a headache. Such a tariff war would result in terrible danger to both economies and pain that would not be easily solved over the years of coming positive relations. But what seems even stranger is the recent, seeming reversal that the US has had on their position of relationship with the Chinese markets.

From one extreme to the next

What seems to be the trend with the current US administration is a seeming constant change from attempts to stabilize trade relations with China, to moving towards further tariffs and further pains to the trade between the two countries. The trade war in recent months has resulted in a lot of hurt for the US economy, but not in a way that was necessarily expected. Many saw that the way the war was going was hurting the middle and the working class a lot more than it was hurting the markets. In reality, the markets were seemingly performing as well as always and without any kind of issue. Seeing this trend and the discontent from the average American, the US seemingly is going to be reviewing the trade war policies it has introduced into their relationship with China.

According to recent reports, the US and China heads of state had a conversation recently on the phone. THere they agreed to resume trade talks and see if they could come to a conclusion that would provide an end to the trade wars happening between the two countries and rebalance the two economies in relation to each other. The meeting will be taking place during the G20 summit in Japan, where the two leaders Xi and Trump will meet on the sidelines of the meeting to discuss the tariffs and see if there is any way to stop the trade war and come up with a more productive and positive solution to the issues that the two counties have been having between each other. This might have a positive effect both on the markets and on the lives of the average workers within both counties.

Being cautious

But in the face of everything that the administration has displayed itself being capable of, being optimistic can be considered to be a dangerous game to play. The recent track record of the relationship between the two countries shows that while they might be intending to help with the relief of tariffs, it is likely that the talks might have no effect whatsoever. The talks might be resumed, but the dangers of the trade war are far from over and are likely going to be kept as part of the current situation of the US and Chinese economies. What is even more dangerous is the likelihood of the two sides further disagreeing, which might result in the tariffs being worsened in the worst case. Although, there is little cause for that at this point, and it is likely that the two sides will be able to settle some of the differences and alleviate the worst of the tariffs.

After all, both sides would benefit from trade being cheaper. More trade means better economies and faster growth. The two rivals have been seeing the negative effect that the war has had on them and want to get done with the trade war as soon as possible. Hopefully, there is a reason to be optimistic, and reason to expect a change for the better, with the market upturn coming sooner rather than later.

By Jon Harden

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