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Analysis

Trade war still likely to deepen, despite truce

This month’s poll focuses on the prospect of further trade antagonism between the US and China. Participants were asked: ‘Will China and US trade tensions alleviate or escalate in 2019?’

The majority saw the current trade stand-off as likely to continue well into the new year, with 66% agreeing escalation is inevitable. In particular, they agreed that neither the US nor China is prepared to back down on key issues like intellectual property and security. The G20 summit in Buenos Aires took place during the running of the poll, in which Washington agreed not to impose higher tariffs on Chinese exports in exchange for a series of wide economic concessions from Beijing. Most answers came before the summit, but those who responded after saw this truce as flimsy, particularly with China indicating that it is in no rush to implement the changes.

However, 34% of respondents disagreed with this conclusion, suggesting that the political and economic pressure of waging a trade war, on both sides, would force any truce to endure.

Jan Poll Imag

Trade tensions will ease in 2019, mainly due to the fact that an escalation does not serve any political interests at this time. In the US, Republicans’ loss of the House of Representatives in the midterm elections and late-cycle rate tightening by the Federal Reserve combine to incentivise the White House to please equity markets – which suggests trade de-escalation. Similarly in China, the recent growth slowdown to address structural imbalances actually offers the opportunity for reform in areas that are equally conducive to improving trade ties.

Elliot Hentov, State Street Global Advisors

Trade tensions between China and the US will continue escalating into 2019.

Antonio Armellini, former Italian ambassador to Algeria, India and Nepal

Cyclical pressures should reduce as US growth slows while the Chinese economy stabilises. However, deeper issues such as intellectual property and security will prove more stubborn to resolve, even if Trump’s tactics are less sensational.

Colin Robertson, SW1 Consulting