G-20 Summit Could Mark a Truce between US and China
Business, Markets

G-20 Summit Could Mark a Truce between US and China 

Last updated on December 3rd, 2018

The trade war between the world’s largest economies — United States and China — has escalated in the past few months. However, the US President Donald Trump will be bringing up the critical issue with the Chinese President Xi Jinping in a meeting at the G-20 summit this weekend.

The potential impact of a prolonged trade war on the financial markets and the broader economy is becoming a matter of concern, particularly for Trump.

Several American officials said that the meeting could result in a truce in form of an agreement between the two countries. They stated that this would delay new tariffs for several months, giving time to both the economies to work on the issues dividing them.

On the other hand, Trump has also indicated willingness to make a deal with Xi, when they meet after the summit meeting of leaders of the Group of 20 industrialized nations, over dinner in Buenos Aires on Saturday.

The escalating trade war economies has given rise to several issues this week– rise in interest rates, spins in the stock market and thousands of layoffs announced by General Motors. Officials said, that this has made Trump anxious, stoking his desire to come back with some positive news after the G-20 summit.

On Tuesday, Trump’s chief economic advisor, Larry Kudlow said, “There’s a good possibility that we can make a deal, and he is open to it.” However, if the outcome would not be favorable, Trump was “perfectly happy to stand on his tariff policies,” he said.

While the US President is concerned about the escalating issues due to the trade war, his administration plans to raise the existing tariffs on Chinese goods worth $250 billion, to 25 percent from 10 percent, on January 1.

Besides, Trump has also threatened to impose the tariffs on an additional $267 billion of Chinese goods, while several fear that the move would result in a full-fledged economic Cold War.

On the other hand, the Trump administration remains divided over the matter. While the mainstream advisers — Kudlow and the Treasury secretary, Steven Mnuchin — are urging the President to compromise, the hard-liners — Peter Navarro, director of the White House trade office — argue that he should keep building up the pressure on China.

Moreover, outsiders like the Wall Street financier Stephen A Schwarzman have been warning Trump that he will be condemned for the market losses, job losses as well as other economic damage from a prolonged trade war with China.

Trump himself is acutely aware of the consequences an economic downturn could haveon the foundation of his presidency, which has prompted him to resolve the issue over the meeting at the G-20 summit.

The depressing effect of trade tensions on the markets has so far affected China majorly, where the growth has slackening and the stock market has swooned. On the other hand, only a fraction of the American economy is seen under the impact.

As the consequences of US-China trade war are being cited as negative for both the countries and their markets, several are hoping the Chinese President to accept the peace treaty with the US.

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