The trade war, two weeks in: No compromise in sight


It has now been 14 days since the opening shots of the U.S.-China trade war were fired (Access paywall). As we noted yesterday, neither side seems to have any confidence that the other will negotiate in good faith — the Chinese Communist Party’s official paper called the Trump administration (in Chinese) “rude and unreasonable, selfish and headstrong” a month ago already, and yesterday, Donald Trump’s economic adviser Larry Kudlow compared local Chinese officials to “mafioso dons” for their role in pressuring American firms to hand over technology. Kudlow indicated he thought some officials wanted a compromise on trade, but President Xi Jinping was “holding the game up.”

From reports today, the prospects for a de-escalation of the conflict continue to seem poor:

  • “China’s Foreign Ministry said it’s ‘bogus’ and ‘shocking’ for White House economic adviser Larry Kudlow to blame Chinese President Xi Jinping for blocking a U.S.-China trade deal,” the Washington Post reports.
  • “Unfortunately, it’s a zero-sum game now between China and the rest of the world,” said Peter “Death by China” Navarro, one of Trump’s top trade advisers to CNBC. He railed in particular against China’s technology ambitions, which we have written about here on SupChina.
  • China seems to have settled on a policy of patience for now, having “shelved a tit-for-tat confrontational approach” and focusing on domestic issues, “carefully managing the trade dispute’s impact on growth without sidelining Beijing’s strategic pursuits such as debt reduction,” the South China Morning Post says.

The primary action Beijing is taking to change trade tensions continues to be its urging of “U.S. firms that do business in China to lobby the Trump administration,” Politico reports, noting that with the exception of ZTE and Huawei, Chinese companies are “absent from D.C. lobbying on trade war.” Here are the most recent reports on where American business is feeling the heat of the trade war:

  • Agriculture is at the top of the list. The Associated Press reports: “Many anxious American farmers are delaying purchases and investment while hoping for a truce in a U.S.-China trade war that has left their crops at a competitive disadvantage overseas.”
  • A delegation of farmers from Iowa visited China, meeting with buyers and attempting to establish relationships that would go beyond the trade war and last “for the next five, 10 years-plus,” the Wall Street Journal reports (paywall).
  • The U.S. Ambassador to China, Terry Branstad, is from Iowa and met with the farmers. He told them that he “would relay their message that they wanted the Chinese penalties to end, but said he couldn’t make any promises,” the Journal says in a separate article.
  • Hollywood thought 2018 could have been the year to finally crack the Chinese market and get the country’s foreign movie quota loosened, but now, “not only have negotiations about widening access to the market stalled, but some in Hollywood also quietly worry that their films could be targeted in retaliation for tariffs the U.S. has identified for about $250 billion in imports from China,” according to Bloomberg (paywall).
  • “American fashion brands and retailers are planning to reduce their reliance on Chinese apparel suppliers,” with “two-thirds of companies polled in industry survey say they are planning to reduce the amount of goods they buy from China,” the South China Morning Post reports.

Previously in SupChina’s trade war coverage:

Trade war, day 13: U.S. gives China cold shoulder at G20 as trade relations freeze over