What the outcome of the trade war the US and China? – an expert forecast

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The relations between China and the United States deteriorated to the limit. Both countries raised tariffs on imports: USA – 128 Chinese goods, and China, respectively, the same number of American. The reason was, apparently, in a mad desire Donald trump to enter the history of the United States as a “defender” of the American market from expansion of products from China. Recall that in 2017, trump said that US trade deficit with China could reach $375 billion to $504 billion, which corresponds to 46%-62% of the total trade deficit of the US (in 2017, it was $811 billion). Thus, the US had certain reasons for increased protectionism, however, the problem was tried to solve in the signature style of trump, that is undiplomatic and without possible serious consequences.
Simply put, instead of protecting the American market trump is trying to solve a completely different task, namely the task of the technological isolation of China, which suspiciously resembles the true purpose of the American sanctions against Russia. Questionable foreign policy goal of the United States once again prevailed over the economic interests of this country. But to isolate China in America will not work. After all, China is very deeply integrated in the value creation process is the global technology corporations.
Moreover, China has flooded the world with its relatively inexpensive but high-quality gadgets, and the most famous Apple products, including iPhone and iPad, are collected in China at the plant owned by the Chinese Corporation Foxconn, located in Shenzhen. Earlier, Foxconn had plans to open a factory in the United States that called in social media a lot of jokes on the theme that the iPhone for the first time in its history has a chance to become truly American.
Moreover, for the entire period of anti-Russian sanctions against the Russian oil and gas sector, the US is not technologically isolated even Russia, which technology has made less tangible progress than China. For example, “Gazprom Neft” has already successfully produces oil in “the Novoportovskoye” field in the Arctic, while the United States banned the supply to Russia equipment for oil and gas on the Arctic shelf. While Rosneft is developing its projects for oil and gas without left joint projects because of the us sanctions Exxon Mobil.
If the U.S. forbid its companies to supply technology in China, they punished only their own companies (similar to the way they punished Exxon Mobil, forbidding her to work in Russia as a result of the Corporation incurred a loss of $200 million). And of course, irrational action in the United States only stimulate technological substitution in China, as well as transfer of technology from EU countries and other developed countries to China.
What will end the trade war the US and China?
We see three scenarios of development of events. The first of them is that USA and China will come around in time and stop a trade war, especially given the rather warm (up to the current confrontation) personal relationships of Donald trump and President XI Jinping. But this scenario seems the most unlikely. More real another option is China will respond to the unfriendly actions of the United States with their unfriendly measures as long as both parties come to the red line, is critical not only for relations between the two countries, but for the whole world, that is, the question of the sale of China’s U.S. government bonds. And, faced with such a threat, the US could retreat that much more likely.
There is a third scenario: the US because of the stubbornness of trump, I will not go on compromises, and China is implementing its threat in the form of a sale of US Treasury bonds, and it may support other U.S. lenders, including Saudi Arabia and Russia. But then the dollar collapses and we can talk about the world economy’s entering in a new crisis. The probability of this option is higher than the first, but significantly lower than the second – common sense in the United States still must prevail. Currently, we do not see serious threats for the Russian rouble, we expect that in April the dollar will fluctuate in the corridor 56-59 RUB.
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Natalia Milchakova,
The Deputy Director of analytical Department,
Alpari