What lies behind the new round between Donald Trump and Xi Jinping shaking the global economy

Just ten days ago, the world looked with optimism at the talks between the United States and China. Negotiators have spoken of important advances and the signing of a pact that would put an end to the era of trade tensions opened on March 1, 2018, when Donald Trump had announced the imposition of 25% customs duties on Chinese steel imports, seemed imminent. .

The president promised an "epic agreement" on April 4 during a meeting with the Chinese delegation in the oval hall. "I think I can say that some of the most difficult things have been agreed upon," he said.

The waiting was tabled during the tour held Thursday and Friday in Washington, attended by Deputy Prime Minister Liu He, chief negotiator of China. But an appointment to clarify the details of the pact had become a desperate attempt to prevent its sinkingafter the sudden change of climate that occurred the previous days.

The surprise was given by Trump himself last Sunday, when he announced that Chinese import tariffs in excess of $ 200 billion would increase by 10 to 25 percent. "The trade deal with China is continuing, but too slowly because they're trying to renegotiate, no!", He wrote on his Twitter account.

Thursday and Friday meetings were not used to channel the process. In addition, the White House brought tension to its maximum. Robert Lighthizer, the US negotiator, has reported in recent hours that "essentially all remaining imports from China" – worth $ 300 billion – will continue to pay tariffs. An earthquake unthinkable two weeks ago.

Reasons for a new frustration

The escalation of tariff attacks has caused a delay downward revision of growth forecasts for the global economy and the fall of major global stock markets, which comes from record numbers. A glimmer of hope came on Dec. 1, when Trump and Xi Jinping met in Buenos Aires after the official closing of the G20 summit.

The leaders of the two world powers They agreed on a truce that calmed the markets and opened a spring of optimism. In subsequent meetings, the parties approached the positions and began to speculate on the possibility of another meeting between the leaders in June, in order to seal an agreement.

But everything changed after talks last week in Beijing. The members of the American delegation came down after having noticed that their Chinese counterparts insisted on discussing issues they thought were already resolved. From that moment, the signals emitted by both parties began to be negative.

"What seems to have triggered this latest dispute is the US accusations that the Chinese have withdrawn from the commitments made in recent negotiations," he said. Infobae Andreas Udbye, Professor, Business School, Puget Sound University, Tacoma.

When Lighthizer informed Trump of these setbacks, the president reacts as he usually does, impulsively. This is how the tweets of last Sunday were reached with the new customs charges. "The United States has for many years lost between $ 600 and $ 800 billion in trade. With China, we are losing $ 500,000 million. I'm sorry, we will not tolerate that anymore!"he said.

"I suppose that, as in the White House, China, opinions are contradictory about the trade conflict. I suspect that when senior officials read the proposed text, they realized that they could not subscribe to that language.. This could be due to the fact that the agreement was perceived as too expensive for China or because it was not aware of it until a legal badysis was done. carried out, "said Joseph W. Glauber, researcher at the Markets, Trade and Institutions Division of the Institute. Infobae.

Among other things, China questions the semantics of the common document under discussion. He maintains that must preserve the "dignity of both peoples". In addition, he is asking Washington to lower tariffs before arriving at a definition, which the Trump government is opposed to, and to set import targets that match actual demand.

"Maybe this is part of a bargaining tactic, even if it would be very extreme. I think the United States and China had different points of view on what was agreed. It would not be the first time. But it was only when they received an explicit legal text that the Chinese understood that they could not respect it, "said Glauber, the chief US negotiator for agricultural affairs in 2007-2008.

The impact of this stagnation is felt throughout the world, but particularly in the Asian stock markets. Shanghai had its worst day Monday for more than three years, with a 5.58% dropand Shenzen, the second largest stock market, lost 7.38%. In Europe, the Ibex 35 ended its worst week of the year with a decline of 3.09%, just like Wall Street, where the Dow Jones contracted from 2.47%.

"What I know about attending meetings with exporters is that China's indifference to intellectual property rights is causing much frustration on the American side. Udbye said. It's a country clearly mercantilist and it uses almost every tool in this toolbox to achieve its aggressive goals of trade surplus. There is a feeling that many US companies can only hope for short-term benefits in China, but end up adopting (stealing?) Technology and becoming self-sufficient. "

Intellectual property is one of the most critical points of the negotiations. Washington wants Beijing to commit to amending laws to ban the theft of trade secrets and technology transfers, but that could jeopardize one of the pillars of its development model. It is not clear if the differences in this area have a solution.

Is a commercial pact possible?

At this point, many economic badysts doubt that a formal agreement and effective compliance with the obligations between the United States and China are concluded. All the steps and The counter-marches of these months reveal that the process is harder than we thought.

It is true that both countries are encouraged to accept. China is downgrading its growth forecasts and this conflict is one of the main causes. For their part, the United States ended the year 2018 with the largest trade deficit in ten years, largely because China has reduced its soy purchases in retaliation for tariffs.

However, the US deficit narrowed by 14.6% in January, thanks to a further increase in soybean imports by China, as part of the concluded truce. These latest data embolden Trump, who believes that his rival can not risk closing his market..

"US and European exporters often have strong brands, which attract Chinese consumers seeking status. This gives US traders an advantage"Udbye said.

The other thing that gives Trump wings is the shocking economic growth that the US economy is experiencing. Although economists agree that the trade war will sooner or later be affected because it will make the inputs of local businesses more expensive, GDP grew 2.9% in 2018, its highest level since 2015. This is combined with unemployment, which fell in April to 3.6%, the lowest rate since 1969.

Therefore, the president He defended the use of the rates this week and even stated that they were "even better than a phenomenal commercial deal". He even promised by Twitter an exceptionally state-led measure for a country like the United States, in order to thwart the reduction of Chinese purchases: " we will buy agricultural products from our larger farmers in larger quantities than China and send them to poor, hungry countries in the form of humanitarian aid ".

Nor can we lose sight of the political dimension of the phenomenon. Trump is a leader who lives by conflict and polarization. To present oneself as the man who fights against powerful China after years of inaction of the traditional politicians allows him to consolidate his base, in a context favorable to the campaign for the elections of 2020.

As an electoral strategy, the confrontation with China could be more profitable than an agreement whose results would be uncertain.. Above all, as long as the economy and employment continue to grow. Maybe Trump prefers to get re-election first and leave negotiations closed for a second term.