Re: US China Trade War, Winners and Losers, and Implications for the Global Economy .

- By Chinedu Okoye 

Persistent Market Uncertainty;

The ninety day pause on newly implemented tariffs is almost up with days to go no significant deals has been reached. As "country-specific tariffs are set to resume, the White House appears poised to fall short of the sweeping global trade reforms it promised to achieve during the three months they were on hold."¹

In order words the markets are still as uncertain as they were nearly 3 months ago and the Trump administration yet to deliver on a core political promise —reducing tarrifs through comprehensive trade deals. Bloomberg reports that: "the pacts likely won’t be fulsome deals that resolve core issues, but instead will address a limited set of topics and leave many specifics to be negotiated later."

 

An extended Pause might be on the Cards:

However, it is "still unclear whether the administration would hold firm on the deadline or extend it to allow more time for talks."¹ The latter I believe is very much likely seen as President Trump was quick to enact a pause shortly after declaring additional tarrifs.

Following the Bloomberg article, "his practice of making sweeping tariff threats — only to back down later — has signaled to other world leaders even modest concessions can secure retreats."

 

Divergence Trade Policy Approach:

Still the president continues to strongarm it's alies as the Treasury secretary implied that: "countries that don’t reach deals by next Wednesday could continue negotiating but would see their tariff rates reverted to the higher April 2 rate or stay at 10% if they are deemed to be “negotiating in good faith,”¹

China on the other hand is courting partners. With trade deals, currency swap agreements and the proposition of a Strategic trade partnership with all but one African countries, offering zero tarrifs for African exports. This was predicted on our paper: 'US China Trade War, Winners and Losers, and Implications for the Global Economy"²

As stated in the paper; US China Trade War, Winners and Losers, and Implications for the Global Economy' the winners of this trade spat between the top two global economies can't be measured in monetary terms and "The real differentiation lies in long-term economic positioning."²

China is clearly making more headway in this regard, given the fact that they are focused on making mutually beneficial deals as opposed to strongarming. Beijing's objective remains as stated in the Zero Equilibrium write up "to protect it's economic interests with other trading partners".²

This is in line with our predictions that: "Beijing.......will most likely leverage it's established economic alliances, to consolidate and strengthen economic partnerships that extend beyond trade to investment partnerships and economic cooperation. BRICS (and candidate countries), and Sub Saharan Africa will be the target, with Europe in their sights as well."²

The Trump administration seems erratic, and foreign governments are more than aware of how quickly things could change with regards policy formulation.

This provides a very uncertain environment for U.S. businesses exposed to tarrifs and foreign businesses exposed to the U.S. market. Though some headway is being made with Taiwan, Indonesia, South Korea and Vietnam. But nothing concrete is our so far.

His Chinese counterpart Xi Jin Ping however is strategic. As the African trade partnership proposed is not aimed at fulfilling the chinese market demand, but to incentivize production upscaling Agricultural products eg Soybean to which the US is their major supplier. Future diversification of Imports is the goal, an attempt to reduce reliance  on US (Agricultural) products.

The currency swap agreements with countries like Nigeria and the bulk of intra BRICS trade settled in their respective currencies also marks a long-term shift away from not just he U.S. market, and inflationary effects of using the dollar as an exchange media.

Conclusion:

While minor progress has been made with Taiwan, Indonesia, South Korea, and Vietnam, there are still no binding agreements.

The contrast in strategies is clear: the Trump administration’s erratic and transactional approach fuels uncertainty, while China’s structured, long-term diplomacy continues to win favor across emerging and frontier markets. 

¹ Catherine Lucey and Jenny Leonard of Bloomberg.

² US China Trade War, Winners and Losers, and Implications for the Global Economy" —Zero Equilibrium.