How Both Trump and Xi Can Stop a Trade War.
I just returned from Beijing, where government and business leaders warned of rising tensions with the United States but remained hopeful that a deal is still within reach. There’s no doubt that if negotiations fail, we are on the verge of another full-blown trade war. And no one wins in this scenario, especially China.
I’ve spent 30 years engaging with Chinese leaders on trade, and this moment feels different. China’s economy is weaker than at any point in the past two decades—youth unemployment is stubbornly high, the property market is slumping, and frustration is mounting among the middle class. Few in China will acknowledge Xi Jinping’s political vulnerability, but his ability to manage these pressures is being closely watched. Meanwhile, China is hedging against U.S. pressure by strengthening trade ties with Russia and the Global South. Some African and Latin American leaders are seeing their countries flooded with Chinese goods and are pushing back against this effort. While diversifying into other export markets may work in the long term for China, in the short run, there’s no substitute for the U.S.
President Donald Trump, while holding a strong negotiating hand, also has reasons to avoid a breakdown in U.S.-China ties. His growth-focused agenda could be undermined if tariffs fuel inflation and weaken demand for U.S. exports. Trump has already ratcheted up tariffs on Chinese goods in the last few weeks, and Beijing has responded with countermeasures.
Source: TIME
