Things really seem to be gathering steam, and neither the US or Chinese side seem likely to be in a mood for compromise any time soon. It could all be solved with good old reciprocity, but that’s a concept that seems further than ever from a possibility. Hence the core problem, of course.
The US, and interestingly the UK as well, imposed limits on the China telecom company ZTE for having violated trading sanctions on Iran and slapped a seven-year ban on doing business with the firm. Too stiff a penalty? It would be if it was just about ZTE. But clearly whoever made the decision was using ZTE as a proxy to send a message beyond ZTE. China’s decision to crack down on US agricultural produce including soybeans was similarly aimed wider than just soybean farmers – the Midwest is a key bastion of Trumpist support.
There are those lining up to warn of nasty consequences if such a tit-for-tat really gets rolling. Michael Bloomberg, former mayor New York and the acceptable face of American capitalism, was one of them this week, and so was IMF Chief Christine Lagarde. The Chinese weighed in to say that they were in favor of fair trade too, although the word reciprocity was unsurprisingly not raised.
One commentator, Scott Kennedy, made the case this week that the US is going into this in the knowledge that it is going to be a serious and lengthy slugfest, but that there is no long-term alternative. Meanwhile, one of the Wall Street’s Journal‘s readers, in a letter to the editor, proposed a more focused approach: “The Chinese are aiming their tariffs at those states that voted for president Trump. We should do the same. Let’s put tariffs on those products from the areas of China that voted for Xi Jinping.” With the WSJ, you just don’t know if tongue was in cheek or not.
But in the end, it’s all about who needs who more. Watch this space to find out, but don’t be impatient.