The so-called "ceasefire" was declared during a dinner between Presidents Trump and Xi at last weekend's G20 event, which signaled a step in the direction of deescalating tensions between the world's two largest economies. Even so, there's a lot of skepticism about whether it actually amounts to anything of significance or is just pushing back the start of their much-touted New Cold War from the end of this year until a couple months into the next one.
According to reports, China agreed to ramp up its purchases of American agricultural, industrial, and energy products, as well as reduce its 40% tariff on automobile imports from the US, which would tie the world's two largest economies closer together after Trump spent the past year trying to decouple them. That, however, is only in the best-case scenario where these promises materialize as expected and the US and China reach a more comprehensive deal for resolving the trade war within the next three months, which many observers fear is much too short of a timeframe for addressing their many differences. Still, it says a lot that they even agreed to this in the first place.
Both countries are coming under various degrees of multisided pressure as a result of the trade war, and it might even be the case that their respective leaderships regret some of their previous decisions. For example, Trump might have gone too far too fast over the summer, which could have scared some of the electorate and contributed to the Republicans losing the House during last month's midterms. Correspondingly, Xi might have second thoughts about his government's previous stubbornness in compromising with the US after his country began to experience a mild economic slowdown as a potential consequence of Trump's tariffs. Under such circumstances, it makes sense for everyone to proverbially ‘take a breather' and reconsider everything.
At risk of sounding overly dramatic, it truly is now or never when it comes to reaching a deal for ending the trade war. Either the US and China use this narrow window of opportunity for entering into a series of mutually acceptable compromises, or they take advantage of the next three months to better prepare themselves for waging the all-out economic war that's bound to materialize if they don't.
Andrew Korybko is joined by Saikat Bhattacharyya, Research scholar in economics at Jadavpur University in Kolkata, and Scott Gibbons, author of the book Trapped by History: the Remaking of America and Death of the Middle Class, The Millennial Metropolis: Power Cities in the Age of Trump, and a forthcoming book, Trumped by History: The Resurrection of the Great American Middle Class.
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