Recent developments in US-China Trade talks are seen
rather disappointing than optimistic. Despite the calming signals from US
officials of a first phase broad trade agreement is entering final stages there
is a significant risk the talks could take longer than expected mid-December
deadline.
Such risks could evolve amid mounting US
military and diplomatic pressure on China. The major sticking point could come
from Hong Kong riots where fears of a bloody shutdown are rising. United
States, Britain and EU called escalating violence unacceptable and urged
Beijing to honor its commitments under the Sino-British joint Declaration. No
signs China will accept such calls and cease police operations are in sight.
More likely China will restore order in the Region in a usual manner to
demonstrate the authority.
The other area of tension – South China
Sea where China has established several military outposts to control all
energy-reach waters of the sea. US claims the territory should be available for
other neighbors and regularly vexes water area of some of the islands China
took military control of. Chinese Defense Minister Wei Fenghe called on the US
military to “stop flexing muscles in the South China Sea and to not provoke and
escalate tensions”.
Whatever the reason could be China in the
longer run will benefit from any delay in the trade talks as they did six month
ago. China will hardly make any serious concessions that could undermine their
way to become No.1 economy in the world. Chinese economy still has a robust
growth. Even slowdown to less than 6% in GDP annually will not halt the second
largest economy to trade places with US in next decade. China has a wisdom to
wait and the break in talks could give them and advantage. So, if a temporary
break down in talks is needed China could afford it. But, the US could not.
President Donald Trump has a limited time before the elections to make a final
effort and persuade China to accept the deal. Being a businessperson to his
fingertips and sanguine of success, he will likely to rise stakes in the deal
and steamroll over competitors.
Meanwhile CNBC reports that mood in
Beijing about trade deal is pessimistic, according to government source. China
troubled after Trump said no tariff rollback while China thought both had
agreed in principle. Strategy now to talk but wait due to impeachment, US
elections.
Further pressure and new trade tariffs
would harm the global trade in a very dramatic way.
World Trade Organization on Monday has
acknowledged that goods trade has stalled in the recent months. World
merchandise trade slowed down to 0.2% in the second quarter of 2019 compared
with 3.5% in the same quarter of 2018. The WTO trade barometer indicators
suggest trade will be weak for the rest of 2019 and remain below trend. That
mean we could see a steady decline in trade volume in the second half of 2019.
If the risks will snap into action the
global markets will be affected and we could see a sharp correction in market
performance, especially in US.
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