As expected, the Group of 20 summit in Buenos Aires, which drew to a close over the weekend, turned into a virtual “G2” summit between the United States and China amid their raging trade war.
In their joint communique, the G20 members reiterated their support for a multilateral trade system, and vowed to evaluate the reform progress of the World Trade Organization (WTO) in their next summit.
There was no mention of the word “protectionism” throughout the joint statement because the US wouldn’t accept it.
Nor was “unfair trade” found anywhere in the joint communique because, likewise, China wouldn’t be happy about it.
The G20 summit sought to downplay the intense Sino-US trade dispute to try to foster an atmosphere that is conducive to facilitating reconciliation between Beijing and Washington at the eagerly anticipated meeting between US President Donald Trump and Chinese President Xi Jinping.
And it appears the shared wish of the “G18” has been partly fulfilled: after a meeting that lasted two and a half hours, the two leaders agreed to put the ongoing trade war on hold by halting additional tariffs on each other’s exports starting from Jan. 1, 2019.
Meanwhile, the two countries would embark on new trade negotiations for 90 days with the aim of lifting all the punitive tariffs on each other’s goods.
During the 90-day truce, US tariffs on Chinese imports will remain at 10 percent rather than rise to 25 percent as Trump had threatened earlier on.
If anything, the Xi-Trump summit in Buenos Aires was able to prevent the trade war from escalating. But that doesn’t mean the two countries are now back on good terms, as the outcome of the 90-day talks very much depends on what bargains Washington and Beijing are going to drive at the negotiation table.
On the surface, it seems the 90-day ceasefire is the result of compromises made by both sides.
However, if we take a closer look, we will find that China made bigger concessions at the Argentina summit, while the US simply agreed to show some restraint in its confrontational and aggressive posturing.
The White House, in its statement after the summit, said China has agreed to “immediately begin negotiations on structural changes with respect to” issues such as “forced technology transfer”, “intellectual property protection” and “cyber intrusions and cyber theft”.
According to the White House statement, Beijing has also agreed to designate Fentanyl, an opioid painkiller, as a controlled substance so as to reduce its flow into the US.
Beijing also has promised to buy a “very substantial” amount of “agricultural, energy, industrial, and other product” from America in order to “reduce the trade imbalance” between the two countries, the statement said.
Chinese Foreign Minister Wang Yi has also acknowledged that China is willing to boost the volume of American imports based on its domestic market demand in order to redress the Sino-US trade imbalance in a step-by-step fashion.
Suffice it to say that the consensus reached between Trump and Xi in Buenos Aires can at best be described as a temporary truce rather than a lasting armistice.
But even so, it is still good news for the rest of the world, because at least the Sino-US trade war didn’t go from bad to worse for the time being, and we believe this good news is going to have positive implications for global stock markets.
As far as foreign exchange rates are concerned, the truce can also help reduce China’s economic losses and stabilize the yuan.
However, there are still two major causes for concern about whether this newly concluded truce between Washington and Beijing can truly restore Sino-US relations to the normal track of bilateral cooperation.
First, the deep-seated conflicts between the US and China aren’t confined to trade disputes, but also involve, among other things, military and political rivalries on a global scale.
Second, perhaps more importantly, given the fact that Trump has proven so unpredictable and volatile when it comes to honoring international treaties, who can guarantee that he won’t go back on his word even if the two countries manage to reach a consensus during the 90-day talks?
It will probably take a great deal of effort and a long time for one to ponder how to deal with Trump, the constantly flip-flopping “mad man”. A wise move for Xi is that he has been gradually adjusting his tactics against Trump by avoiding going head to head with the latter and making the right concessions at the right time.
Nonetheless, it would be unrealistic for one to expect that China and the US can truly settle their deep-rooted differences through 90 days of negotiation.
What we all hope for is that both leaders of the world’s two largest economies can demonstrate extraordinary wisdom in settling their differences in the days ahead.
This article appeared in the Hong Kong Economic Journal on Dec 3
Translation by Alan Lee
[Chinese version 中文版]
– Contact us at [email protected]