Fighting two battles at the same time, Trump needs to call an end to trade war

By Li Hong Source:Global Times Published: 2019/11/3 20:08:40

Illustration: Luo Xuan/GT

US stocks jumped across the board on Friday, with the S&P and NASDAQ indexes all closing at record highs. Obviously, the positive mood shown by US President Donald Trump toward clinching an interim trade deal with China is electrifying investors. 

It is in the interest of the US, China and the global economy for President Trump to instruct and direct his trade negotiating team to speed up ongoing talks, by ironing out any remaining differences with the Chinese team, so that the two countries' leaders could convene at a venue agreeable by both sides, and ink on a phase-one deal sometime in November. 

The markets have been anxiously waiting for "the shoe to drop down" that China and the US could sign a trade deal and come back to their previous normal trade relations. Signing a trade pact will remove the largest uncertainty inhibiting economic recovery. 

It is difficult to predict how President Trump will fare during the upcoming 2020 US presidential election. It will be a guessing game. But if the world's largest economy continues to trend downhill - as US economy cools further to 1.9 percent GDP growth in the third quarter from 3.1 percent in the first quarter and 2.0 percent in the second quarter - and enters a decimating contraction next year, the American people are more likely to vote with their feet. 

Recent US history has shown that an incumbent US president faces insurmountable difficulty to get re-elected if he steers the American economy into a slump, particularly in the election year. 

And, there are now more predicaments facing President Trump, as he is now fighting two battles at the same time. Domestically, he is mounting a vociferous rebuttal of a US congressional impeachment inquiry provoked by his shadowy Ukraine dealings exposed by a whistleblower. It seems that US Democrats have now united more closely and driven the House scrutiny of Trump toward a public grilling. 

Outside America, the Trump administration remains in an unprecedented trade battle with China, which has entered its 16th month and is inflicting broader and deeper bruises of damage on both economies. Many smaller economies, such as South Korea and Singapore, are caught in the crossfire of the two giants and their economies are now in a worse shape, if not already in tatters. 

The Trump government, guided by its "America First" protectionist foreign policy, launched the tariffs war against China in 2018, but China's tit-for-tat punitive tariffs on a slew of US agricultural products have battered the interest of American farmers hard, who constitute a crucial political base for President Trump. 

Also, the sharply higher tariffs imposed on more than $400 billion worth of each other's goods have seriously twisted the pricing system of global trade, as well as disrupted the supply chains of global corporations. 

The woeful results of Trump's tariffs war have incrementally added up to production costs of American, Chinese and other countries' industrial firms. A recent US economic report says a rising number of small and medium-size industrial enterprises in the US' Mid-West, including Michigan, Wisconsin, Illinois and Ohio, are forced into insolvency because of the exorbitant tariffs as well diminishing markets. The blue-collar white workers in those states used to be strong supporters of Trump. 

A businessman with some acumen, Trump knows perfectly what a bad economy means to his re-election bid. And, his top advisors will certainly speak in his ears that it is extremely perilous for him to engage in two battles in the election year. 

Over the weekend, Trump said in a Twitter post that China and the US are seeking a venue for the two countries' leaders to sign the phase-one of a trade deal, which he claimed will make up "60 percent" of the trade deal. The other 40 percent will be left for the trade negotiators to talk at a later timing. The tweet not only boosted US stocks, but also triggered a strong uptick in China's Shanghai stock composite index on Friday. 

On Saturday, President Trump sent his top economic advisor Larry Kudlow to take on the airwaves, who said that there is a good chance for the phase-one deal to be signed in November, and the US negotiating team is "very optimistic" about concluding the marathon trade talks. 

Everyone knows that ending the trade war and canceling all the punitive tariffs will be the two smartest things President Trump can ever do for the US economy, which will also set a solid foundation for him to seek reelection. Inaction or dragging down on removing the tariffs will continue to harm the US economy, hurting Trump's political base, and eventually diminishing his reelection hopes. 

The author is an editor with the Global Times.


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