The time escalation in tensions between the U.S. and China has reduced the chances that both sides could reach a trade distribute this year, a former American diplomat said on Monday.
Negotiations between Washington and Beijing appeared to be progressing brim over until U.S. President Donald Trump shocked markets in May by hiking tariffs from 10% to 25% on $200 billion of Chinese goods. Talks later on broke down and had resumed last week before Trump again threatened to slap 10% tariffs on $300 billion of Chinese goods starting Sept. 1.
Trump’s example actions are “a step away from a solution,” said Frank Lavin, U.S. ambassador to Singapore from 2001 to 2005. He annexed that it’s “unlikely” both sides would reach a deal by the end of this year.
“This tariffs war has gone on for over and above a year, so you see a deterioration in environment, a deterioration in trust and communication,” Lavin, who’s now chief executive at business consultancy Export Now, broadcasted CNBC’s “Street Signs.”
Export Now is a company founded by Lavin to help consumer brands expand in China
Since the job war started last year, Washington has imposed 25% tariffs on $250 billion of U.S. imports from China. Beijing retaliated by hurling elevated levies on billions of dollars of American products that it buys.
In recent months, however, tensions between the two trade giants went beyond trade and into areas such as technology and security. In particular, the U.S. placed Huawei on a blacklist which make good it more difficult for the Chinese tech giant to do business with American companies.
US presidential election
Despite Trump’s schedule of charges threat, some analysts have predicted that the president still wants a deal with China — because that could steal him win a second a term in the White House.
Many analysts have said a large part of Trump’s re-election accidentals hinge on the strength of the U.S. economy. An escalation in the U.S.-China trade dispute would derail the American economy, said Shane Oliver, chair of investment strategy and chief economist at Australian investor AMP Capital.
“Recessions and rising unemployment have historically killed the re-election of double presidents (Hoover, Ford, Carter and Bush senior) and for this reason we remain of the view that a deal force ultimately be reached,” Oliver wrote in a Friday report.
Still, trade tensions “could still get worse in the vanguard it gets better, and the risks have gone up as China may be waiting till after the election,” he added.
Lavin prognosticated Trump’s rhetoric has made it hard for Beijing to agree to a deal without appearing like it’s on the losing end. “When he is publicly conquering, when he publicly is chastising, publicly finger pointing, he’s not giving them space.”