A trade deal between the US and China is unlikely to happen because China is notorious for breaking promises and Trump is not the genius deal-maker he claims to be.
The first major trade action against China came early in 2018 when President Donald Trump imposed safeguard tariffs on solar panels and washing machines. Since then, things have escalated much further, and there are now over $500 billion US tariffs imposed on China goods.
The relationship between the US and China is deteriorating, and both countries are preparing for the worst. China is pushing for a large regional trade deal throughout Asia that excludes the US. Trump recently tweeted “Our great American companies are hereby ordered to immediately start looking for an alternative to China.” And “We don’t need China and, frankly, would be far better off without them.”
Stuck in a loop
For almost two years Trump’s twitter account and corresponding media outlets have been stuck in a loop. Rounds of angry “Tariff Man” tweets hammering down on unfair trade are quickly followed up with positive news claiming progress is being made.
Despite the numerous “Trade talks are going very well” tweets from Trump, economists are seeing through the lines. These tweets are more about fluffing up the stock market and less about actual progress in trade negotiations.
This trade war news loop seems to be here to stay, at least until after the 2020 elections. China seems to be waiting things out. They will be better off negotiating with a different president instead of battling it out with the “chosen one.”
Expect things to get worse before they get any better
US consumers will see price increases in everyday items and purchases like clothes, microwaves, electronics, groceries, and more. Big corporations like Walmart have stated prices will go up due to the effects of tariffs.
Trump has often denied that tariffs will impact consumers. But now he’s recently delayed tariff increases set for September to avoid spoiling the Christmas shopping season.
The Federal Reserve has already cut interest rates to lessen the impact of the trade war on the economy. With signs of slowing growth, inverted yield curves, and record-level debt, this trade war is likely to have severe consequences.
The Fed cutting interest rates while the market is near all-time highs indicates that a US-China trade deal is very far away. If it was going to happen anytime soon, things would look very different.
Tariffs being increased and then delayed and increased again doesn’t really signal hope. China is not going to lay down easily and neither is Trump. So, try not to get your hopes up. A US-China trade deal is unlikely to happen anytime soon if ever.