U.S. President Donald Trump attends a bilateral meeting with Chinese President Cing Dingping at the G20 leaders summit in Osaka, Japan, June 29, 2019.
Kevin Lamark | Reuters
The United States and China have been here before.
After threatening to impose potentially devastating tariffs, President Donald Trump withdrew after talks with Chinese President Cai Dingping at the G20 summit in Japan on Saturday.
Trump and Si, both of whom share their strong personal relations, have reached a similar agreement at the previous G20 summit in Argentina late last year.
But these conversations eventually failed, and the rates today are much higher than they were at the beginning of May.
And if history is a guide for the future, the gentlemen's agreement reached among the leaders of the two largest economies in the world at the weekend in Osaka does not offer a clear path to tariff cancellation and the ending of a trade war that threatens to overcome global economy in recession.
"This is a temporary interruption," said Peter Boockar, Chief Investment Officer at Bleakley Advisory Group for CNBC. "I do not see any way to a deal and we stick to 25 percent tariffs on 250 billion dollars worth of goods." Baker is not alone. The Eurasia Group, for its part, sees only a 45% chance of a trade deal this year. And Trump seems to be in no hurry. Prior to sitting with Xi on Saturday, the president explained in an interview with Fox Business News that although he thought the deal was possible, he did not feel urgent to raise the tariffs. Trump said. "We get a whole fortune and honestly [it̵
Businesses generally disagree.
More than 600 US companies, including Target and Walmart, have called on Trump not to impose additional tariffs, warning that such a move could cost 2 million US jobs.
And while the business groups on Saturday welcomed the resumption of the talks, they clearly showed that they are still patiently waiting for a final settlement. According to Boocher, there is no reason to celebrate.
"If I'm the CEO, wait for this weekend to go, I feel better? If I'm in the industry, maybe I feel a better touch, it's not worse in the short run, but still have to deal with this tariff of 25% and the threat of tariff overruns, "he said, the change is domestic legislation to increase the protection of intellectual property for foreign, especially American companies
This is a key point for Administration of Trump The president's decision in May to p upgrading tariffs to 25 percent for China's $ 200 billion came after Beijing claims to have tracked key commitments to a draft agreement, including IPR
Indeed, China's Liu Deputy Prime Minister has just reiterated Beijing's position that the deal must be balanced and "expressed in terms that are acceptable to the Chinese people and do not undermine the sovereignty and dignity of the country." of Boocquir, asking China to make changes to its national legislation, will be like Beijing, asking the US to make constitutional changes to meet the economic demands.
"The United States will have to accept that China will not put the protection of intellectual property in law," said Boocavar.
But the Trump administration does not seem ready to give up on this point. US Trade Representative Robert Lahtiser rejected China's call for a balanced deal, citing Intellectual Property as a reason. The only difference is that the Federal Reserve will lower interest rates, he added, which at that time was not possible.
United States. elections for Trump and China
While the deal may or may not be possible this year, Trump at least has an incentive to keep the tariffs up to the presidential election in 2020.
Trump needs the economy to well, and another tariff increase may be "quite destructive to the US economy," according to Ed Yardeni, president of Yardeni Research. "It does not make sense to escalate the trade war now and create problems in the economy and lose the election, in which case China will be able to negotiate with a completely different president by 2021," Yardeni said.
And Beijing has its own incentives to wait for the presidential elections in the United States. If the negotiations continue until the elections, they will know if they have to deal with Trump or anyone else, Yardeni added.
However, the main case of Goldman Sachs "remains a 10% rate for the remaining $ 300 billion of Chinese imports, less than 25%, proposed by USTR," the bank said in a note before G- 20. In the future because of the tariff increases they have made, "there may still be additional tariffs later this year."
And according to Boockvar, if Trump decides to cope with his threat and impose tariffs on the remaining 300 billion "Dollar exports to the US, the impact can be devastating," he said