Halt in escalation of trade tensions a step in the right direction
China’s President Xi Jinping and his American counterpart President Donald Trump sat down on the sidelines of the G20 summit in Argentina on Saturday for their first face-to-face meeting since the escalation of trade tensions began in March. In what may prove to be a significant turning point in the conflict, they agreed to not impose new tariffs, and to work on addressing each side’s concerns. And they asked their trade teams to step up the negotiations towards the elimination of all the tariffs imposed so far this year, and to push bilateral trade ties back to normal as soon as possible.
Chinese President Xi Jinping speaks during a working dinner with his U.S. counterpart Donald Trump in Buenos Aires, Argentina, Dec. 1, 2018. [Photo: Xinhua/Li Xueren]
By hitting the brakes to avoid a further escalation of the trade frictions, the two presidents have shown a willingness to meet in the middle and resolve their differences through dialogue. At the APEC summit in Papua New Guinea last month, President Xi made the point that “no one wins a cold war, a hot war, or a trade war.” Over the past eight months, the negative impacts of the trade frictions between China and the United States have shown the world the truth of this argument: Aside from the damage that the trade tensions have caused the world’s two largest economies, the growth rate of the global trade in goods is expected to slip by 0.3 percent. And the International Monetary Fund has trimmed its projections for world economic growth this year and next by 0.2 percentage point down to 3.7 percent, so a halt in the escalation of the trade frictions is good news for people everywhere.
According to the agreement reached by President Xi and President Trump, China will, in line with its domestic needs, increase its imports of agricultural products, energy, manufactured goods, and tertiary services from the United States to balance their bilateral trade. High-quality American agricultural products such as oranges, soybeans, pistachios, wine, and beef are very popular among China’s massive cohort of middle-income consumers. In the energy sector, China’s annual output of crude oil and natural gas reached 200 million tons and 138 billion cubic meters respectively in 2016. But annual consumption amounted to 580 million tons and 210 billion cubic meters – this amounts to a big deficit between supply and demand. The United States is one of the world’s biggest producers of oil and natural gas, so an increase in imports of these two resources will help China to diversify its energy supply base as it transitions away from its reliance on coal.
How big of a share the United States can win of China’s import market remains to be seen. China’s market values fair competition, and so doesn’t respond positively to pressure from pushy sellers. And China is expanding access to its market not only to the United States, but also to the whole world. As a result, American sellers have to provide a value proposition that beats that of their global competitors.
The two presidents agreed that their trade delegations should soon begin a new round of negotiations. China will propose practical solutions to the trade issues that protect the interests of both sides and also the world trade system. As President Xi made clear at the G20 Summit in Argentina, “Going forward, win-win cooperation is the only choice for us, be it in good times or bad”. At the same time, China is fully aware that its trade issues with the United States are complicated, and it can’t expect all of the points of difference between the two sides to be quickly resolved. China is ready to weather the potential challenges, because its leadership holds firm to the belief that no waves or tides can overwhelm China’s economy.