Arnon Dror | US, China to End Trade War?
Arnon Dror woke up this morning to news that the US and China are about to end their trade war, one that has been going on for a year now. While he has not agreed with all facets of the country’s trade policy, he recognizes the importance of the cessation of hostilities between two of the world’s largest economies. Arnon Dror read in the Wall Street Journal that the trade departments of both countries are close to working out a deal that will lower tariffs on US goods and the removal of certain sanctions against China. Image Source: CNBC.com
It’s been a wild year for both countries as far as economics is concerned, says Arnon Dror. The US has missed out on the huge Chinese export market for certain goods, including electronics, while China’s economic growth has slowed down considerably. Beijing, for its part, has been preoccupied with reducing high-risk loans to manufacturers and exporters, many of whom were discouraged by the prospects of rising US tariffs on Chinese imports. While Arnon Dror feels that the US trade deficit is still manageable, the impending deal would close the gap even further.
This early, Arnon Dror says President Trump and Chinese President Xi Jinping might be meeting at the former’s Mar-a-Lago resort in Florida later this month. Trump has been calling the planned meeting with Xi a “signing summit”, which implies that negotiations are already ongoing. Despite the objections of several members of the Trump administration, it looks like the mood in Washington is cautiously optimistic about potential deals.
One sign that the once-icy relations between the two economies were beginning to thaw was President Trump’s decision to postpone an upcoming increase in tariffs on Chinese-made goods indefinitely. The move, which was made last week, has predictably been met with raised eyebrows among market strategists. Arnon Dror believes that any deal with China should also consider the factors that sparked the trade war in the first place, including complaints that Beijing is forcing US companies to forcibly transfer technology to local manufacturers despite concerns over intellectual property rights violations.
In addition, the US has cracked down on Chinese tech companies, including electronics giant Huawei, which has been shut out of new 5G-based networks over security and privacy concerns. In addition, Huawei’s chief financial officer might be extradited to the US after being arrested in Canada last year on bank fraud charges. These issues, says Arnon Dror, indicate that Washington and its allies are getting serious about spying allegations.
The Shanghai Composite Index gained more than 3% on Monday, later settling down to 1.1% at the end of the trading session. Arnon Dror attributes the gains to the Wall Street Journal article on the China deal. On the other side of the Pacific, the NYSE Composite Index gained above 6.5 points as of midday, a change of 0.05%, while the S&P 500 rose by 0.87%. While the day’s stock market gains cannot be attributed to the news on China alone, Arnon Dror is relieved to hear that a deal, however temporary it might be, is finally being hammered out.