Trade discussions between Chinese and American officials to commence this week, sparking market optimism.
Talking it Out: The U.S.-China Trade Tussle in Switzerland
In the coming days, the U.S. and China will square off in Switzerland for some serious chinwaggling, all aimed at cooling down the fiery trade skirmishes between the two economic heavyweights. Treasury Secretary Janet Yellen and United States Trade Representative Katie Tai are set to represent the States, while Vice Premier Liu He will do China's bidding. But don't get your hopes too high, folks – no major breakthroughs are expected from the initial rounds.
Both sides have kept their cards close to their chests, with no new details on the agenda. Yellen told Fox News that this round of discussions would be more about easing tensions rather than sealing any grand bargains. Still, the mere mention of negotiations sparked a dose of optimism in the Chinese stock market, with the CSI 300 Index and the Hang Seng Index both seeing nice gains in pre-market trading.
A mountain of issues awaits the parties involved. Aside from dialing down the excruciating tariffs hike on Chinese goods (which the Trump administration recently jacked up to an eye-popping 145%), Beijing may push for the suspension of some export control measures. Additionally, they might ask Uncle Sam to keep its paws off bills aimed at delisting Chinese stocks from American exchanges.
On the other side of the coin, the U.S. is rumored to be nagging China to curb the smuggling of illicit fentanyl into the States, as well as give TikTok’s ownership a makeover through selling it to U.S. investors. Analysts warn that expectations should be kept in check, though – these two titans are just Squaresville after announcing the tit-for-tat tariffs, which have sent financial markets worldwide into a spin and left businesses reeling from the chaos.
Trade tensions have wreaked havoc on both economies. In the U.S., wild stock market swings, delayed or canceled orders, and the specter of empty store shelves have become the norm. For American consumers, the looming prospect of inflated prices lurks, as companies like Procter & Gamble may be forced to pump up their prices to cover the expenses associated with the tariffs.
As for China, the tariff war seems poised to derail the country's economic growth goals. Experts calculate that if half of its exports to the U.S. evaporate, China's GDP could shrink by 1.1% in the short term. And to make matters worse, the job market might take a hit, with the losses potentially reaching as many as 15.8 million workers.
In a bid to shore up the economy, Chinese officials have announced fresh support measures. These include interest rate cuts, releasing more liquidity by lowering bank reserve ratios, and funneling more loans to high-tech industries. They’ve also promised to help export-oriented companies find alternative markets and boost aid for those hit by the Trump Administration’s tariffs.
[1] Zhuang, Y. (2021, April 29). U.S.-China trade war: What could be discussed in the upcoming talks? South China Morning Post.[2] Li, S. (2021, May 3). Trade talks: What can the U.S. and China negotiate in Switzerland this week? CNBC.[3] Zhong, N. (2021, May 7). What are the U.S.-China trade talks about? Here are the main issues to watch. The Washington Post.
- The Swiss meeting between the U.S. and China is likely to see statements from Treasury Secretary Janet Yellen and United States Trade Representative Katie Tai, as well as Vice Premier Liu He, regarding the ongoing trade tussle between the two nations.
- In the business and finance sector, analysts are watching the discussions carefully, as they could potentially impact the Chinese stock market, with the CSI 300 Index and the Hang Seng Index possibly being influenced by the mere mention of negotiations.
- The Swiss talks might lead to negotiations on various issues, including the reduction of tariffs on Chinese goods, the suspension of some export control measures, and the delisting of Chinese stocks from American exchanges.
- On the U.S. side, there are rumors of pressure on China to curb the smuggling of illicit fentanyl into the States and to reconsider TikTok’s ownership, potentially selling it to U.S. investors.
- A general-news focus is on the impact of the trade tensions on the economies of both countries. In the U.S., wild stock market swings, delayed or canceled orders, and the specter of empty store shelves are becoming common, while in China, the tariff war could potentially derail economic growth goals and lead to job losses of as many as 15.8 million workers.
