Trade War: Who Has The Upper Hand In Negotiations?

The 16-month trade war between the US and China had since led to tit-for-tat tariffs on each others’ goods, and as they reach closer to sign a ‘phase one’ trade deal, tariff rollback will be the first compromise taken by both sides in efforts to end the trade war. However, issues on intellectual properties and agricultural purchases remain unresolved, keeping markets’ skepticism achieving the phase one deal in place. 

US President Donald Trump’s protectionism’s stance made negotiations tough for China to the extent where China had voiced out their dissatisfaction towards a one-sided deal in favor of the US. So far, the US had only made efforts to put additional tariffs on hold or reducing part of it, while on China’s side, they have agreed to make large agricultural purchases from the US. 

President Trump earlier emphasized that he is ready to raise tariffs if no deal is achieved with China substantially. The threat is a common tactic known to pressure China into giving in to US demands to protect their economy, which is highly export-dependent. However, the question lies in whether or not China is afraid of the US. 

Market expectations were that US tariffs on Chinese goods would, in the long-run, harm China’s economy, further pressuring economic growth amid a global recession. However, recent reports from CNN showed higher spending by consumers, adding on with robust earnings by Chinese companies. Even with current tariffs implied in China, their economy remains resilient. 

Does the US have the upper hand in negotiating with China? Or are they just digging their own grave while continuously pressuring China with punitive tariff threats? Another theory suggests that China can sustain current tariffs effect, at least until the next US general election in November 2020, to see if the Trump administration will be the ones continuing trade negotiations, or in a different scenario, maybe sooner than expected if the impeachment process comes to passes. 

All in all, both sides are still expected to sign a phase one trade deal before the election, which would provide President Trump the positive enforcement he needs to secure a second term as the US President.