Dashed Trade Deal Has Ripple Effects

By HENG WEILI

THE prospects for a China-U.S. trade deal are on hold for now， but the repercussions of not having one echoed through the political arena and markets.

Joe Biden， currently the front-runner for the Democratic nomination for U.S. president， criticized President Donald Trump for his handling of the most recent round of trade negotiations， which concluded on May 10.

At a campaign stop on May 13 in Hampton， New Hampshire， Biden said“the only people paying the price are farmers and working people right now.”

“The president has done nothing but increase the tariffs， the debt and the trade deficit，” Biden said. “The way we have to proceed is we have to have our allies with us. Its not just us. We have to keep the world together.”

On May 2 in Iowa， Biden had downplayed the notion of China as an economic threat to the U.S.

“China is going to eat our lunch？ Come on， man！ I mean， you know， theyre not bad folks. But guess what？ Theyre not competition for us，” he said.

Trump tweeted on May 12 that China is “dreaming” that Biden gets elected in 2020.

Whether China is a major economic competitor or partner likely will be a key issue in the 2020 U.S. presidential campaign.

“Raising tariffs will hurt both U.S. & China economies + more importantly will hurt U.S. farmers/consumers/businesses，”tweeted Republican Senator Chuck Grassley of Iowa， a major soybean-producing state.

China announced on May 13 that it plans to set import tariffs ranging from 5 percent to 25 percent on 5，140 American products — such as beef， salmon， vegetables， coffee， flowers， batteries and liquefied natural gas — on a revised US $60 billion target list.

“Chinas adjustment on additional tariffs is a response to U.S. unilateralism and protectionism，” the Ministry of Finance said. “China hopes the U.S. will get back on the right track of bilateral trade and economic consultations and meet with China halfway.”

Trump had announced amid the recent high-level trade talks in Washington that he would raise tariffs on Chinese goods to 25 percent from 10 percent， affecting 5，700 categories of products.

Beijing said on May 13 it would “never surrender，” reiterating that it was always open to talks， but vowing that China would defend its national interests and dignity.

On May 13， China also said U.S. policies are a threat to the World Trade Organizations viability.

U.S. Treasury Secretary Steven Mnuchin told CNBC that the talks were continuing and he was making arrangements to travel to Beijing.

The vicissitudes of the trade talks have elicited sharp responses from world markets over the past year， either positively or negatively. That was the case again in mid-May.

On May 13， global equities tumbled， with major Wall Street stock indices down more than two percent each. The Dow Jones Industrial Average closed at 25，325， off 617 points， or 2.4 percent， while the S&P 500 fell 70 points to 2812， or 2.4 percent. The tech-heavy Nasdaq Composite index tumbled 270 points to 7647， or 3.4 percent.

“Trump the Dow Man and Trump the Tariff Man can co-exist for a while， but at a certain point they cant，” Megan Greene， chief economist at Manulife Asset Management， told politico.com. “The Dow is down around 2.5 percent now， but I think its got to be down around 10 percent for Trump to feel significant pressure. So far the tariffs have been angled away from the consumer. But if he goes ahead with the rest of the tariffs， the consumer will really feel the pinch.”

Economists and industry consultants maintain that it is U.S. businesses that will pay the costs and likely pass them on to consumers. Consumer spending accounts for more than two-thirds of U.S. economic activity.

U.S. tariffs last year led to reciprocity by China， which imposed 25 percent levies on US $50 billion worth of American products， including soybeans， beef， and pork， and lower tariffs on a list of US $60 billion in goods.

Goldman Sachs economists said recent data showed the costs of Washingtons tariffs on China last year had fallen entirely on American businesses and households， with no clear reduction in prices charged by Chinese exporters.

The U.S. has pledged aid for its farmers who have been hurt by tariffs during the yearlong trade dispute. Trump said on May 13 that his administration was planning to provide about US $15 billion to help farmers whose products might be targeted.

U.S. soybean futures fell to their lowest in a decade on May 13.

Soybean growers are “losing a valuable market， losing stable pricing， and losing an opportunity to support our families and our communities，” Davie Stephens， president of the American Soybean Association， said in a statement.