China Holds The Upper Hand on Trade
Prof. Josef Mahoney "There’s little to no trust that the US wants to turn the corner on trade, that the US wants to avoid decoupling or provocations related to red-line issues like Taiwan."
Featured contributor Prof. Josef Mahoney was interviewed by Bloomberg News regarding reports the US and China continue to step forward with trade negotiations, given this prompt: "China and the US agreed in principle to a framework for implementing the consensus they reached in Geneva, China’s trade representative Li Chenggang tells reporters after talks in London. Li says China hopes that the progress they made will be conducive to building trust."
Full remarks:
Chinese officials and businesses are well-aware that the US-instigated trade war has been ongoing for 6.5 years, and over that period of time the biggest casualty has not been lost sales but trust. There’s little to no trust that the US wants to turn the corner on trade, that the US wants to avoid decoupling or provocations related to red-line issues like Taiwan.
On the one hand, #china is very cautious, aiming to avoid being drawn into the Trump circus, which infamously lurches in different directions, the anathema of Beijing’s political culture, and which can reverberate negatively in China itself should the US again undercut talks or a potential deal, insomuch as the Chinese people expect their government to stand firm.
On the other hand, the issue goes beyond what Beijing thinks: what we’re hearing and seeing here in China is that businesses that are finally pivoting away from the US market, moving full speed towards cultivating the Chinese market, stepping forward with the “dual circulation” model of sustaining international trade when possible but increasingly selling their products at home. Platforms, influencers, branding, domestic logistics, all of these pivoting, if not domestically then towards other foreign markets.
In short, it’s not just about trying to restore trust between governments, it’s also that Chinese businesses no longer trust the US either, and Chinese consumers are increasingly being drawn to Chinese brands that have not only become much more competitive and world-class, they’re also much better marketed and avoid the taint of American trade aggression. So what happens if the two sides reach a deal but Chinese businesses and consumers aren’t that interested anymore? What happens if China continues to make big breakthroughs in its own #chips production capabilities?
We’ve heard a lot about agreements to frameworks for talks. Should we interpret these as being more than “we’ve agreed to talk, and agreed to how we going to talk?” That said, in tandem with the trust problem, the fundamental issue remains: chips vs. rare earths. Everything else is a peacock dance. #bloomberg