Why a US-China Tariff Ceasefire Is Coming Soon
Donald Trump's negotiating style – “shout loudly and carry a white flag” – may seem incoherent and dishonest, but it has been spectacularly successful for him. And he's about to use it again with China.
LONDON – The meeting between US President Donald Trump and China’s President Xi Jinping at the G20 summit in Buenos Aires this week is being viewed as a make-or-break moment for the world economy and financial markets. But even if no agreement is reached at the summit, there are at least four reasons to expect a de-escalation of the US-China tariff war.
The first, paradoxically, is the recent shift in US rhetoric away from a focus on American jobs to the explicitly Sinophobic objectives of “containing” China and preventing it from developing into a technological power that could challenge US global hegemony. Now that Xi realizes he is engaged in a generational struggle against the containment of China, he simply cannot afford to lose this opening skirmish of Cold War 2.0.
And Xi has plenty of policy tools available to ensure that the Chinese economy does not suffer any serious damage from US tariffs. To the extent that tariffs reduce China’s exports, the government and central bank can offset the economic impact by stimulating domestic demand.