US-China trade wars: The positive scenario – Standard Chartered

US-China continue trade talks in Washington this week and a positive outcome could be increased imports by China from the US, suggests Madhur Jha, Head of Thematic Research at Standard Chartered.

Key Quotes

“Trade talks between the US and China continue this week in Washington after recent talks held in Beijing did not result in anything concrete. The fundamental concerns of the US relate to the perceived unfair lack of access to key related Chinese markets for US firms (such as in the consumer and advanced technology sectors), forced technology sharing if US firms want to enter certain Chinese markets, and inadequate intellectual property (IP) protection. In an effort to persuade China to address these issues, the US administration has exerted pressure by focusing on the large bilateral trade deficit with China. The US continues to look for a USD 200bn reduction in the trade deficit with China over the next two years. For this, it proposes not only to impose tariffs on Chinese goods imports but would also like China to agree to open up its economy to investment and imports from the US.”

“There could be a more positive outcome, which could benefit global trade growth as well. China has already indicated its intention to liberalise certain sectors, such as the financial sector, and open up its economy to automobile imports. In a more positive scenario, we would look for China to accelerate the pace of liberalisation and to allow greater investment and imports into certain key sectors of the economy.”

“If China increases its imports from the US by diverting these imports from other countries, this could lead to a deterioration in global welfare as other countries lose out. However, if these trade talks lead to an accelerated opening up of China’s trade and investment systems, this could see greater trade benefits across the globe.”