Pressure won’t solve Beijing-US trade conflict
The US stock market plunged on Tuesday, sending the Dow Jones Industrial Average down 799.36 points. The group of technology stocks known informally as FAANG (Facebook, Apple, Amazon, Netflix and Google) shed more than $140 billion in market value by the end of the trading Tuesday.
China’s exchanges in Shanghai and Shenzhen significantly trimmed their morning losses on Tuesday, with the Shanghai and Shenzhen indexes closing down 0.61 percent and 0.32 percent, respectively. The ChiNext board even rose 0.22 percent.
Two major factors are believed to have caused the hemorrhage on Wall Street: fears of a serious economic slowdown or even a recession in the US, and uncertainty over the US-initiated trade strife with China.
The US bond market kicked off the month by flashing a recessionary signal. An inversion of a section of the Treasury bond yield curve occurred on Monday, with the yield on the 5-year bond sliding below the yield on the 3-year note. Investors took it as an ominous sign that the world’s largest economy is nearing the end of an upcycle.
But it was the Trump administration that put a damper on the nascent market optimism stemming from the China-US agreement to defuse their nine-month trade war and give negotiators 90 days to cut a deal, following the G20 summit in Argentina.
It is the White House that sent conflicting and mostly misleading signals to the market. Probably to serve its own purpose of placing pressure on Chinese negotiators, the White House disclosed that China’s leaders had agreed to purchase a “very substantial” amount of agricultural, energy and industrial products from the US to reduce the yawning trade gap.
It claimed that Beijing will start buying from American farmers “immediately.”
In addition, senior Trump administration officials revealed to the US media that China will soon move to “reduce and remove” the tariffs on all US-assembled automobiles that Beijing imposed earlier in a tit-for-tat retaliation for US punitive rates on Chinese goods.
Making investors particularly jittery, US President Donald Trump went on a tweet spree earlier this week, warning that he was ready to make China “pay for the privilege” of selling to the US market if negotiations failed. He went too far in describing himself as a “Tariff Man” – in an apparent attempt to inflict pressure on US trading partners. After that chest-beating, the market seemed to quicken its slide.
In contrast, China’s Ministry of Commerce said in a statement on Tuesday that China-US trade negotiations will proceed based on a set timetable and the Chinese government will implement “specific items” that were already agreed by the two sides in Argentina as soon as possible.
China’s top economic planner, the National Development and Reform Commission, on Monday promulgated a strict policy guideline to clamp down on any intellectual property rights breaches.
What the US government has done since the summit talks at Buenos Aires is muddying the waters, which jolted the markets. By always taking a hard line and making a stack of exorbitant demands, the Trump administration can only draw the ire of the Chinese public and diminish the odds of clinching a deal.
A good trade deal that is acceptable to both sides – and well regarded by the broader market – must be born from the basis of eye-to-eye sincerity, mutual benefit and reciprocal compromises.
If the White House truly wants China to reduce vehicle tariffs and keep US auto companies afloat, it should send its negotiators to Beijing, concur with Chinese counterparts and work out a symmetrical arrangement.
It was the Trump administration that put a damper on the nascent market optimism stemming from the China-US agreement to defuse their nine-month trade war and give negotiators 90 days to cut a deal, following the G20 summit in Argentina.
The author is an editor with the Global Times. bizopinion@globaltimes.com.cn