The global economy took a nosedive this week as the two largest economies in the world dug deeper into the U.S.-China trade war, threatening to take down global fortunes as collateral damage. The escalation of hostilities follows the Trump administration's plan to increase tariffs on all Chinese imports to the United States from 10% to 25%. As Beijing retaliated, markets tanked and U.S. consumers woke up to the prospect of paying higher prices for consumer goods.
While the White House today said that the US would delay any decision to raise tariffs on automobiles and auto parts for six months, neither side is looking to bend any time soon - Beijing is questioning Washington's sincerity in wanting to reach a deal, whereas the U.S. remains defiant. Many question whether the crux of the problem is actually the trade deficit, or whether it's more about China's investment rules and the unlevel playing ground for U.S. investment in China. Either way, the protracted struggle is inflicting global economic pain, and instilling panic in U.S. farmers that they may become the biggest losers in the struggle. "We don't want to be collateral damage," said Kevin Paap, a corn and soybean farmer in southern Minnesota. "If they don't reach a conclusion soon, it's going to be really somber times."
Meanwhile, China is swiftly losing its political leverage in the United States, with businesses and policymakers on both sides of the aisle hardening their position against the Middle Kingdom and the restrictions it has placed on foreign companies. A new report by the National Committee on U.S.-China Relations finds that in 2018, two-way foreign direct investment (FDI) plummeted by 60% amid the tumultuous U.S.-China trade war, although bilateral venture capital flows continued to increase.
Prepared by China-US Focus editorial teams in Hong Kong and New York, this weekly newsletter offers you snap shots of latest trends and developments emerging from China every week, while adding a dose of historical perspective.