The US-China trade war has some similarities with the Brexit negotiations. Officials in both situations are under pressure to announce a headline agreement, leaving the details to be worked out later
May 20, 2019 | Paras Anand
Trade tensions between the US and China have been rumbling on in the background whilst global markets made substantial gains this year, hitting all-time highs in the US in the last couple of weeks. Investors hopeful of a meaningful agreement and a potential unwinding of recently imposed tariffs have been served a wake-up call.
The commitments contained in the 150 pages of text negotiated between Washington and Beijing were called into question by President Donald Trump in a series of tweets, both for not being substantive enough and a sense that negotiations were taking too long. His measured response? To raise the stakes on China by increasing both the rates on existing tariffs and threaten to broaden the value of goods in scope. Inevitably China has retaliated.
Brexit highlights the difficulty matching expectations with reality
This escalation has clearly unnerved markets, but most are now hoping for an accord to be reached before Trump and Xi meet at the G20 in Japan next month. As the focus narrows on the detail of the framework and the areas of contention, it may be more helpful to take an ‘outside view’ and look at precedents when considering this recent escalation in trade tensions between the world’s two largest economies. Doing so does not make me hopeful.
Brexit has taught us an important and relevant lesson: when the terms of trade between economies are thrown up in the air, catapulted largely by domestic political motivation, both a confusion and a complication result. The confusion is the mistaken belief that that something so emotively and rapidly triggered can be somehow resolved with the same expediency. The complication is the attempt to establish substantive economic or political agreements against a ticking clock, especially where the original driver was rejection of the status quo rather than defining a satisfactory end state.
Let us be under no illusion, the agreement that the US ...
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Keywords: Global Trade