By: Azhar Azam
*This is one of my opinion pieces (unedited) that first appeared at "China Global Television Network (CGTN)":
https://news.cgtn.com/news/2020-01-19/Why-a-tariff-free-phase-two-deal-should-be-the-pressing-priority-NnUCWebbt6/index.html
At an event in the Peterson Institute for International Economic Washington, IMF Managing Director Kristalina Georgieva warned on Friday that the phase one deal between China and the US would carve the uncertainty that paled the global economic growth but won’t eliminate it.
She further recalled Fund’s previous forecast that projected the global trade tensions to shave 0.8% or $700 billion off international economic growth, about one-third of which was due to tariffs and the rest resulted from slowdown in business investment. Georgieva underscored that the deal was only an interim solution and the impact on investment was there on the cards.
Trade and investment are the vital components of the international economic system that relentlessly lurks in the twilight if any of the critical organs cease to function efficiently. That was the case when in a stream of diplomatic rhetoric; the US President Donald Trump unleashed a trade war with China about two year ago.
As a result of pervasive use of tariff sledgehammer – the international trade writhed, import costs whizzed radically, investors became leery of business investment, capital markets blunted and millions of farmers befell prey amid the protracting trade frictions between the two world’s largest economies.
Tariff guns didn’t discriminate between wealthy and poor nations and beaten up all in chorus including Americans. The US Congressional Budget Office (CBO) in August estimated American GDP to roughly shrink by 0.3% in 2020 over tariff-elicited increased domestic prices alongside declining purchasing power of the consumers.
As the phase one deal will still leave a vast majority of the Trump’s tariffs on Chinese goods in place, the business investment – threatened by uncertainty over future barriers to trade and their perception of risks associated with investment in the US – are likely to be affected heavily in the coming months.
Though the extensive and exhaustive negotiations between the two high-fliers economies would at least unwind the growing anxieties across the international trade and prevent the global economy to bleed for the time being, yet the specter of business investment is even now represents a gloomy picture as Georgieva pointed out.
So, there is an urgent need that both China and the US quickly set off a new round of talks, phase two dialogue, about revocation of existing additional tariffs to rejuvenate the investors’ confidence and to relocate the international economy on the economic recovery mode without more ado.
Immediate consultations on the phase two trade deal, designed for tariff reversal, are in the interest of the Trump administration that faces the looming presidential elections in the US. While the move would revivify the purchasing power of the ordinary Americans, overburdened with a loss of $580 in average household income, the US president can gain a lot politically to stem a second term by withdrawing tariffs on Chinese imports.
Trump should actively pursue a phase two deal with China also because the stimulus to the business investment would cast out the forthcoming downward pressure on the US economy, providing him an opportunity to create thousands of new jobs in an election year. He can of course boast of his achievements in the public just before election canvassing gets into a full-blown boom.
Manufacturing is one of the sectors where he can start from. Like others, the US trade row with China has emphatically impaired the US manufacturing sector. The chafing relations were primarily held responsible for the contraction of American manufacturing activity that dropped to a reading of 47.2 in December, the lowest since June 2009. It was also a fifth straight month of retrenchment.
Tariff hits by Trump on Chinese goods have proved fairly counterproductive for the country’s manufacturing sector. Albeit the US collected some $46 billion in duties from the US companies importing products from China however the country’s factory output was stalled and the new employments in the sector were leveled off.
Prevalence of the US tariffs provided very little respite to the American manufacturers who contributed more than $2.4 trillion to the US GDP in the third quarter of 2019 and employed about 12.9 million workers as of December. A phase two deal can do a charisma to their prosperity.
If China and the US would rescind tariffs on each other goods, millions of manufacturers in the country would be able to import cheap components from China and hence would be in a position to increase the US exports to China and the world over apart from generating more job opportunities.
Beijing has already committed to ramp up billions of dollars of manufactured goods from Washington. If tariffs are reversed, China’s purchase of auto, auto parts, machinery, electrical equipment, pharmaceutical products, medical devices and other manufactured goods would expansively shore up the key US manufacturing sector.
For more than 18 months, China-US trade tensions have rounded up global economy and decelerated its growth, roiled the financial markets and dismantled supply chains worldwide. Only a tariff-free phase two trade deal can bring back them all from the brink of collapse.
*This is one of my opinion pieces (unedited) that first appeared at "China Global Television Network (CGTN)":
https://news.cgtn.com/news/2020-01-19/Why-a-tariff-free-phase-two-deal-should-be-the-pressing-priority-NnUCWebbt6/index.html
At an event in the Peterson Institute for International Economic Washington, IMF Managing Director Kristalina Georgieva warned on Friday that the phase one deal between China and the US would carve the uncertainty that paled the global economic growth but won’t eliminate it.
She further recalled Fund’s previous forecast that projected the global trade tensions to shave 0.8% or $700 billion off international economic growth, about one-third of which was due to tariffs and the rest resulted from slowdown in business investment. Georgieva underscored that the deal was only an interim solution and the impact on investment was there on the cards.
Trade and investment are the vital components of the international economic system that relentlessly lurks in the twilight if any of the critical organs cease to function efficiently. That was the case when in a stream of diplomatic rhetoric; the US President Donald Trump unleashed a trade war with China about two year ago.
As a result of pervasive use of tariff sledgehammer – the international trade writhed, import costs whizzed radically, investors became leery of business investment, capital markets blunted and millions of farmers befell prey amid the protracting trade frictions between the two world’s largest economies.
Tariff guns didn’t discriminate between wealthy and poor nations and beaten up all in chorus including Americans. The US Congressional Budget Office (CBO) in August estimated American GDP to roughly shrink by 0.3% in 2020 over tariff-elicited increased domestic prices alongside declining purchasing power of the consumers.
As the phase one deal will still leave a vast majority of the Trump’s tariffs on Chinese goods in place, the business investment – threatened by uncertainty over future barriers to trade and their perception of risks associated with investment in the US – are likely to be affected heavily in the coming months.
Though the extensive and exhaustive negotiations between the two high-fliers economies would at least unwind the growing anxieties across the international trade and prevent the global economy to bleed for the time being, yet the specter of business investment is even now represents a gloomy picture as Georgieva pointed out.
So, there is an urgent need that both China and the US quickly set off a new round of talks, phase two dialogue, about revocation of existing additional tariffs to rejuvenate the investors’ confidence and to relocate the international economy on the economic recovery mode without more ado.
Immediate consultations on the phase two trade deal, designed for tariff reversal, are in the interest of the Trump administration that faces the looming presidential elections in the US. While the move would revivify the purchasing power of the ordinary Americans, overburdened with a loss of $580 in average household income, the US president can gain a lot politically to stem a second term by withdrawing tariffs on Chinese imports.
Trump should actively pursue a phase two deal with China also because the stimulus to the business investment would cast out the forthcoming downward pressure on the US economy, providing him an opportunity to create thousands of new jobs in an election year. He can of course boast of his achievements in the public just before election canvassing gets into a full-blown boom.
Manufacturing is one of the sectors where he can start from. Like others, the US trade row with China has emphatically impaired the US manufacturing sector. The chafing relations were primarily held responsible for the contraction of American manufacturing activity that dropped to a reading of 47.2 in December, the lowest since June 2009. It was also a fifth straight month of retrenchment.
Tariff hits by Trump on Chinese goods have proved fairly counterproductive for the country’s manufacturing sector. Albeit the US collected some $46 billion in duties from the US companies importing products from China however the country’s factory output was stalled and the new employments in the sector were leveled off.
Prevalence of the US tariffs provided very little respite to the American manufacturers who contributed more than $2.4 trillion to the US GDP in the third quarter of 2019 and employed about 12.9 million workers as of December. A phase two deal can do a charisma to their prosperity.
If China and the US would rescind tariffs on each other goods, millions of manufacturers in the country would be able to import cheap components from China and hence would be in a position to increase the US exports to China and the world over apart from generating more job opportunities.
Beijing has already committed to ramp up billions of dollars of manufactured goods from Washington. If tariffs are reversed, China’s purchase of auto, auto parts, machinery, electrical equipment, pharmaceutical products, medical devices and other manufactured goods would expansively shore up the key US manufacturing sector.
For more than 18 months, China-US trade tensions have rounded up global economy and decelerated its growth, roiled the financial markets and dismantled supply chains worldwide. Only a tariff-free phase two trade deal can bring back them all from the brink of collapse.