China turning the tables on Trump

Editorial | Mary Ma 11 Apr 2019

In its latest World Economic Outlook report, the International Monetary Fund held US President Donald Trump's trade war with China responsible for the softening in global economic activities. It cited a number of factors and the trade war topped the list.

It wasn't the first time the global lender has blamed Trump's trade war trait.

The projections released this week were nonetheless interesting. While predicting US economic growth to slow down from 2.9 percent in 2018 to 2.3 percent in 2019, and 1.9 percent in 2020, it forecast China's economy to decelerate at a pace milder than the United States - from 6.6 percent in 2018, to 6.3 and 6.1 percent in 2019 and 2020.

By proportion, Americans are going to fare worse than the Chinese.

Aha! No wonder Trump is feeling the pinch that forced him to step up attacks on the US Federal Reserve over the Fed's quantitative tightening exercise, and send out signals about the ongoing trade negotiations with China that the financial market naively interpreted as positive.

Speaking of the trade talks, Trump said something very monumental could be announced within the next four weeks.

Trump is already mounting his campaign to seek a second term in next year's US presidential election, and places a lot of hopes on the economy. If the US economy unfortunately doesn't perform as strongly as expected, it would be difficult for him to persuade voters to accept that his unilateral approach to international relations would make America great.

It's plausible the Sino-US trade talks have passed a tricky point. If China played defense in the beginning and were keener than the United States in reaching a deal, Beijing may have just turned the tables on their opponents in Washington - knowing that Trump would come under pressure if time runs out for him to submit a strong economic report card.

The four-week timetable mentioned by Trump was misleading, as it has become clear China is no longer in the mood - it was weeks ago when Beijing was in a hurry to achieve a deal.

Now it's simply impossible for Beijing policymakers to miss seeing Trump's Achilles heel. The longer the trade negotiations persist, the greater the pressure Trump feels.

Chinese state media Global Times' appeal for patience in an editorial didn't happen by chance. It's saying that the fruit was not yet ripe, and that any suggestion a deal would be reached by month's end doesn't appear to be credible.

President Xi Jinping and Premier Li Keqiang's double visits to Europe came at a sensitive time of the trade negotiations. Would Trump be pleased to see the two leaders going to Europe one after another and contracts being signed as a result?

He surely wouldn't.

The US commander-in-chief's tweet warning about slapping tariffs on US$11 billion (HK$85.8 billion) worth of European goods to retaliate against the European Union's subsidies to Airbus was just that - a warning, an expression of displeasure.

It's more probable that the trade talks will drag on for some time.

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