America, China trade ties key to global economy’s health

The United States and China have reached a tariff deal. Which is provisional and holds good for 90 days, where each side has cut back on the additional tariffs imposed on the other.

The United States had imposed a 125 per cent tariff hike which President Donald Trump had trumped reciprocal tariffs, and China had countered with a 135 per cent hike. After the deal, the United States will stick to the 10 per cent initial tariff and China to the 30 per cent rate.

The joint statement said that the two sides felt that trade relations between the two countries was important for the stability of their own relations as well as for global economy. The deal will come into effect from May 14.

The joint statement has also named the officials from each side who will participate in the talks to follow. For the United States it will be Secretary of Treasury Scott Bessent and Trade Representative Jamieson Greer and for China it will be Hi Lifeng, Vice Premier of the State Council.

The two sides will meet alternatively in the United States and China, or at a neutral venue agreed to by both sides. So, the trade war which President Trump had unleashed with the tariff onslaught at the beginning of April, and which was countered by China, now comes to an end, and it is hoped that the continued talks would mean that the trade war is at an end. There could be some adjustments in the actual rates of tariffs that each side would like to impose on imports from the respective countries.

It appears that President Trump’s tariff blitzkrieg was a mere threat to get a better trade deal from America’s partners, and he is not obdurate that he will not move an in inch from his decided policy measure.

Trump is showing himself to be flexible enough, and he has shown that he is not averse to talks and to adjustments. The issue is whether he could have started with the talks instead of the declaration of enhanced tariff rates. It has been a show of economic belligerence, and the fact that he did not mean to be belligerent shows Trump either to be much too naïve or much too unwilling to play by the settled rules of the game.

The Chinese have responded to Trump’s aggressive policy with aggressiveness. And it appears that the Chinese gambit of standing up to America has paid off, and the talks got going. With the two sides going back to the pre-tariff hike policy, it is back to the starting point.

It is a fact that the US-Chinese tariff war, however short it was, did rattle the global market sentiment. It is also the case that the American market sentiment was hit in a big way by Trump’s tariff hikes and the stock markets went into a mild tailspin.

The fact that the American markets have rallied after the announcement of the deal to hold back on the tariff hikes for 90 days showed that Trump’s moves dampened the American markets. China was indeed looking for alternate markets and it would have taken time for Chinese exports to have found a new home, and it would have suffered in the short term. The deal has helped the markets in the two countries to recover their footing as it were.

Trump is also willing to talk with other partners over the tariffs issue. He has already concluded a deal with the United Kingdom. The trade talks with the European Union and India are on the cards. So, it is going to be a furious round of bilateral trade talks for America.