- President Donald Trump and China have been engaged in a tense trade dispute for over five months.
- Both sides recently increased tariff threats.
- Trump threatened to slap 25% tariffs on $US200 billion worth of Chinese goods, while China threatened tariffs on another $US60 billion worth of US goods.
- The two sides do not appear to be talking, which raises the chances of a drawn-out trade war.
President Donald Trump’s trade dispute with China is entering its sixth month, and there are no signs it will end anytime soon.
Both Trump and China continue to issue new threats of tariffs. And negotiations have been scarce, increasing the possibility of a drawn-out trade war.
Ed Mills, a policy analyst at Raymond James, said in a note to clients that while the possibility of a breakthrough deal remained, it was unlikely to come without increased trade restrictions.
“We remain extremely concerned about the potential volatility between now and a breakthrough, especially as both sides are more inclined to elevate tension than blink,” Mills said.
Instead of moving toward any type of resolution, both the US and China have rolled out new threats of tariffs over the past few weeks:
- The trade war kicked off in earnest in July when Trump imposed 25% tariffs on $US34 billion worth of Chinese imports to the US, prompting China to respond in kind.
- Trump then threatened to slap 10% tariffs on another $US200 billion worth of Chinese goods, again leading to a counterthreat from Beijing.
- The action intensified Thursday, when US Trade Representative Robert Lighthizer announced that Trump instructed the USTR’s office to examine the possibility of raising the tariff rate on the $US200 billion worth of Chinese imports to 25%.
- China then retaliated with a threat on Friday to hit $US60 billion worth of US exports to China with tariffs ranging from 5% to 25%. If China follows through on the threat, nearly 90% of all US goods heading to China will be subject to tariffs.
The two sides have also been digging in publicly. Larry Kudlow, the president’s chief economic adviser, told Bloomberg TV that Trump was not afraid of dragging out the fight with China.
“Their economy’s weak, their currency is weak, people are leaving the country,” Kudlow said. “Don’t underestimate President Trump’s determination to follow through.”
At the same time, China has expressed a willingness to go to the mat over tariffs. The Chinese Ministry of Commerce said Friday that if the US continued to “blackmail” China, the conflict would only intensify.
Kudlow, a former Wall Street economist and CNBC host, told Marketplace’s Kai Ryssdal that talks with the Chinese had stalled out.
“Virtually nothing has happened in a trade dialogue with China in a month or six weeks,” Kudlow said. “We haven’t heard from them.”
Kudlow also told reporters on Friday that the administration held a call with China within the past few days involving high-level officials. But multiple reports indicate that prior to the call, there has been almost no dialogue for the past month.
The lack of negotiations is compounded by the fact that Trump and the White House have not articulated clear goals for the trade fight with China.
Mills said all signs suggested the trade fight would stick around for the foreseeable future.
“Regardless of a potential breakthrough, we believe that this Chinese trade fight will last well beyond the midterm elections as the reforms sought by the Trump administration will be difficult for China to accept and implement.” Mills said.
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