- The end in sight
Though the Sino-US trade war is by no means over, its end has been brought into sight by the agreement between US and Chinese negotiators in the latest round of talks and most immediately by their agreement that the latest round of US tariff increases would not take place. In other words, the increase of tariffs on $250 billion of imports to 30 per cent (from the present 25 per cent) will not take place on October 15, while a tariff of 15 per cent on $150 billion of goods will not go into effect on December 15. Though there has been no agreement on a final trade deal, there is an agreement on agricultural products, which will allow the US to export more to China. It is no coincidence that this will allow US President Donald Trump to claim success in his support base of farmers at exactly the right time, when he comes up for re-election in 2020.
There was a certain inevitability about the outcome of the talks, though the fact that they had to take place at all, showed that trade can be subject to non-rational impulses as well. One problem that has been highlighted is that the US is liable to throw its weight around in response to populist pressures. If President Trump had not seen it as electorally advantageous to slap tariffs on Chinese imports, he would not have. It was not just unfortunate for the two, but the entire world, that the trade war occurred, for it meant that there were knock-on effects worldwide, as supply-chains worldwide got sucked in.
There does not seem any way of preventing the US (or even China for that matter) from throwing its weight around. The US is developing a habit (markedly under President Trump) of using its own clout to wangle advantages for itself. Hopefully, it will find itself readier to let the invisible hand of the market play its role, rather than decide matters itself.
