Neal Kimberley

Macroscope | The trade war is here to stay: both China and the US are gearing up for a long, hard fight

Neal Kimberley says not only is the gulf of disagreement too wide to bridge, but neither side is focused on finding a fix: US attention is trained on the larger picture of China’s rise, while Beijing is working to reflate its economy to offset the impact of the trade war

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US President Donald Trump and Chinese President Xi Jinping leave at the end of an event at the Great Hall of the People in Beijing in November 2017. Recognition that the US-China trade war could drag on for years will force a market re-evaluation, affecting prices across asset classes. That re-evaluation is arguably already starting. Photo: AFP

Neal Kimberley

Published: 10:00am, 25 Sep 2018Updated: 10:30pm, 25 Sep 2018

China and the United States are poles apart when it comes to resolving their current trade dispute. Recognition in the markets that the US-China trade war could drag on for years will force a re-evaluation of how the changed circumstances will affect prices across asset classes. That re-evaluation is arguably already starting.

President Donald Trump asserts strongly that his interest is in securing “fair” trade deals, but his words seem to indicate that he is a mercantilist who believes that running trade deficits, by definition, weakens the US.

China willing to talk trade but not with American ‘knife at its neck’

“We are fixing one-sided trade deals that have stolen American jobs and drained American wealth, just taken away our wealth. It’s like candy from a baby, they took our money, they took our jobs. They took everything. They took our dignity,” Trump said on Friday at a rally in Missouri.

More specifically, “China last year took US$500 billion from our country – 500 billion, not million, 500 billion.” He added: “We have rebuilt China. We have given them such wealth.”

Yet, as Chinese Premier Li Keqiang told the World Economic Forum in Tianjin last week, China is aware that it remains a developing country, and it still ranks at the “lower end of the world” in terms of per capita GDP.