Economist on US Tariffs: 'The Trade War Will Be Particularly Damaging for China'

With trade negotiations between China and the US deadlocked, leading economists have warned that if no resolution is achieved; businesses throughout the world could take a hit. Sputnik spoke about it with economist Pauline Loong.

Sputnik: Can the US and China reach a compromise to avoid further trade tariffs?

Pauline Loong: China is likely to Trump a little more than what the media would be expecting. In terms of the trade gap, maybe not quite the 100 billion that Trump would want, but close enough to make him be able to claim victory.

I also think that Market access is a big deal for the Americans, and perhaps they may even set up some sort of complaint mechanism, that would allow American input, because the Americans have been saying; promises, promises, you've been saying that forever! How do we trust that you do that?
So maybe if they come up with some sort of a mechanism that might; that might calms things down a bit.

READ MORE: 'Sticking Point' in China-US Dispute Lies Beyond the Trade War — Professor

Sputnik: How damaging would further US economic sanctions be?

Pauline Loong: Actually, the trade war will be particularly damaging for China. China is the one with the trade surplus, but also China has few retaliatory options that are cost effective.

People always talk about the holding of US treasuries, well yes that is an option, but they can't do that without killing themselves and decimating their own reserves.
There are options, but none of them are cost-effective, and also this is coming at the worst possible time for China, not that there's any good time for a trade war, but China is facing slower growth, rising bond defaults and increasing pressure on capital outflows.

More importantly, I believe there's a change of stance in Beijing, given the squeeze on its technology companies by major markets, now China might want to live to fight another day, instead of fighting this head on.

The views expressed in this article are those of the speaker and do not necessarily reflect those of Sputnik.