Editorial: US-China trade deal

When the US and China announced mutual tariff revisions for 90 days with a promise to follow up with more talks, the world seemed to have heaved a sigh of relief. It will not be known anytime soon as to what brought them to the negotiation table and who blinked first. There are no clues in the joint statement, which is peppered with the routine, tired diplomatic cliches which often obfuscate rather than illuminate. There’s nothing to read between the lines in the statement that talks about “recognizing the importance of …bilateral economic and trade relationship… of a sustainable, long-term, and mutually beneficial economic and trade relationship… and moving forward in the spirit of mutual opening, continued communication, cooperation, and mutual respect”. Be that as it may, global financial markets cheered by surging towards the pre-tariff war levels, even though the fog of uncertainty has not yet cleared.

The White House predictably described the deal as “a win for the US, demonstrating President Trump’s unparalleled expertise in securing deals that benefit the American people”. As is his wont, President Trump has claimed a “total reset with China” and highlighted the Asian giant agreeing to open up its market to American business as “the best part of the deal”. China’s official reaction was formal when Vice Premier He Lifeng described the talks as "candid, in-depth and constructive" and had achieved “substantial progress, and reached important consensus". However, a day before the revised regime was set to kick in, Chinese President Xi Jinping in an address to the China-CELAC (Community of Latin American and Caribbean States) Forum asserted that there are “no winners in tariff wars or trade wars... Bullying and hegemony will only lead to self-isolation. "A cursory look at the timeline since February, it is evident that the US had unleased a tariff war against China which in turn retaliated in kind and remained defiant and even after a deal continues to resent Trump’s bullying tactics. Both sides would have wanted a thaw in the relations, but China could wait longer and absorb shocks than the US. Even strong European nations, which were aggrieved by the Trump administration, do not have the wherewithal to take on the mighty US. But China could and did. The less said the better about developing countries, which find themselves in the midst of the clash of titans.

India and other emerging low-cost Asian manufacturing hubs hoped that there would be an impetus to the “China Plus One” strategy due to the raging US-China trade war. The impetus and the war both have lost some of their momentum, at least for now. India, in particular, loses an important bargaining chip in its ongoing bilateral trade negotiations with the US and could feel the pressure to ease the hard bargaining it envisaged. Trump’s unpredictable and unconventional moves are quite unsettling to many countries, and India is not an exception. If one were to go by his controversial assertions regarding mediation in the India-Pakistan conflict, the Trump-Modi relationship of 2017-21 does not seem to have stood the test of time. In Trump’s second term, India needs to play the cards it’s been dealt rather judiciously and rejig its strategy. As for the US, rebalancing trade relations with China is going to be more challenging as the latter has gained an edge over the former in this round.