Friday, July 10, 2020
Martin Hennecke

Trump steering trade war into a lose-lose situation
As I mentioned in my last column, the impeachment inquiry against US President Donald Trump could have a mixed impact on Sino-US trade negotiations. But for now, the atmosphere is rather fraught. Vice Premier Liu He once again heads the Chinese delegation for the talks in Washington which will be held today and tomorrow, though there are rumors that his visit will be cut short. Even if this is not true, it's clear that trade sentiment has soured and the talks could not come at a worse time, even though the latest reports say that China is willing to accept a partial deal as long as no more tariffs are imposed, while substantially increasing purchases of US soybeans. The cries for impeaching Trump have grown louder with more people close to the Ukraine scandal coming out against the President. New polls, meanwhile, show a majority of Americans support the impeachment, with trust in the President decreasing. This will make Trump become tougher on Beijing, and it will be harder for him to back down when negotiating a deal. An escalation of the trade war could distract the public's eye from the impeachment case. Aside from Trump's fast-changing positions on the trade war, the ratcheting up of trade tensions between China and America has not helped ease fears in the financial markets. The US government has added eight Chinese companies to a trade blacklist just days before the negotiations while the White House is said to be moving ahead with discussions around possible restrictions on US capital flows into China, with a particular focus on investments made by government retirement funds, according to a Bloomberg report. This news has spread despite Treasury Secretary Steven Mnuchin denying any such plans last week, reflecting the strong voice of anti-China hawks. We should not underestimate this development because if the US hits a brick wall in the talks, it could find another way around to win the trade war. The circumstances surrounding the talks and the launch of the impeachment inquiry may, to some extent, make Beijing feel it does not have to rush into any broad deal as Trump now has his back against the wall. Meanwhile, in more bad news, China's state broadcaster CCTV, the main television distributor of the NBA in the country, and Tencent said they will not broadcast two NBA exhibition games in China following a tweet from Houston Rockets general manager Daryl Morey backing the protesters in Hong Kong, which was later deleted. Beijing would normally have ignored this cultural provocation, especially ahead of a major negotiation, but the broadcast ban shows that tempers are flaring in China. For embattled Trump, it's better not to agree to a deal that might seem weak in the eyes of US citizens. He is under attack from the Democrats, anyway. If Trump can't resolve the trade war through a broad deal, he might just take on the Democrats and China together. As long as the US economy remains robust, Trump may believe he could battle with Beijing and the Democrats simultaneously.

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