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In the last two weeks the stakes in the ongoing trade conflict between the United States and China have increased significantly. After negotiations stalled in July, President Trump expanded his tariff targets to cover nearly all imports from China. But the weapons in this conflict have become increasingly more sophisticated. Beijing retaliated by suspending purchases of U.S. agricultural products and by lowering the value of its currency to make Chinese goods less expensive abroad. In response, the U.S. Treasury named China a currency manipulator and vowed to take actions to eliminate the alleged unfair competitive advantage. In addition, President Trump announced that the United States is not going to do any business with China’s tech giant Huawei.
While these escalations have recently uneased investors and rattled the markets, they have yet to make an obvious impact on the U.S. economy, albeit U.S. farmers have begun to experience the negative effects of lost sales to China. But how have these actions resonated in China? There are some indicators that the trade war has had an impact on the Chinese economy, as well as public perception in that country.
At the moment, the U.S. can claim a short term victory, although China appears to be playing the long game. Official reports indicate that Chinese economic growth has decelerated to its slowest pace since 1992, as businesses have held back on investment in light of the ongoing trade tensions with the United States. Also, Chinese exports to the U.S. declined by $5.6 billion in June, versus a $1.8 billion decrease in U.S. exports to China.
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