The US and China are still standing in different positions because of which the trade war may not come to an end before 2020. The uncertainty over the current issues is leading the businesses to postpone their decisions because of their investments and consumption are getting hurt.
Unpredictability leads to damage
Interestingly, the unpredictability of trade policies doesn’t come from China but from the US. Though both countries have decided that they will resume trade talks, it is unlikely that a compromise will occur anytime soon. For now, US President Donald Trump and Chinese President Xi Jinping have decided that the US will not levy new tariffs on Chinese goods. During their Saturday meeting in Osaka, the two also agreed that the US will ease its ban on Chinese telecom giant Huawei from receiving equipment and components from American companies.
However, this is only patchworked as far as the bigger picture is concerned. The existing US tariffs on Chinese goods worth a whopping $250 billion are still relevant. The counter-tariffs by the Chinese also continue to be firmly in place. It is still unclear how the two countries will react to the tariffs next. However, the uncertainty is enough to depress economic activity and sabotage investments for the next few years. This fact was a highlight in a recent report by the Bank of International Settlements, based in Basel, Switzerland.
There will be more sounds and fury
The report notes that an unusual rise in “sound and fury” is common in trade conflicts in times of uncertainty. It is apparent in major economic shock waves created by the conflict. The bank’s general manager Agustin Carstens said that the US had followed different actions in trade policies and it is affecting establishment arrangements with countries like Mexico and China, among others. He noted that the political climate is important, and because of the rising tensions, corporates are delaying decisions which will slow down economic growth.
Currently, the US has agreed to hold on the imposition of tariffs of up to 25% on Chinese goods. These goods were not subject to any duties before and are worth a whopping $300 billion. It is unclear if the US will continue to hold these tariffs as Trump has noted that he will impose them if he wants to. Trump hasn’t been a fan of Chinese trade and called the country’s entry into the World Trade Organisation a “terrible deal.