As the bombastic rhetoric turned to tough actions, the criticism, surprise, and even fear started to set in. Candidate Donald Trump was laughed at for his tirades against the Chinese winning at the expense of Americans, at the strong intent for the imposition of tariffs, and for his claims that he would ‘punish’ China. But as Candidate Trump got the keys to the White House on the backs of millions of middle class and blue collar Americans who saw little improvement to their respective bottom lines under President Obama, so came power and the opportunity to act. And act he did.
For the last two years, China and the USA have been embroiled in an economic and commercial trade war. Few predicted that the President would be as aggressive and consistent in the decisions he took to both initiate, and escalate the trade war. He went as far as firing senior economic advisers who disagreed with him, and has even taken criticism from the U.S. Chamber of Commerce – a body that is generally pro-Republican, Globalist, and keen on deep and profitable Sino-U.S. ties.
But after two years of tit-for-tat back and forth actions, we now have what appears to be a ceasefire and deal to ease tensions and begin to resolve the underlying conflict between the two countries. What’s really in this deal? What does it mean? And who are the real winners? Let’s take a look.
- The stock market and the President will benefit from the deal. Stock market euphoria will continue and the President will appear to be serious, assertive, and successful in winning ‘concessions’. Investors will applaud the erosion of tension, return of stability, and the reduction in the risk of increased escalation.
- U.S. consumers remain losers, as many tariffs that they are paying for in the form of higher costs for Chinese products and services will remain in place. U.S. farmers have seen a record increase in bankruptcies as they have been cut off from one of their biggest customers. A $28 billion bailout has been paid out to them given the costs of the trade war. There is extreme skepticism on the Chinese honouring the $200 billion in increased buying for products and goods that is in this deal.
- The big winners in the deal are U.S. financial corporations. They will gain new access to parts of the Chinese market that they haven’t had previously. U.S. firm will now have the capacity to sell products and financial services to the 1.4 billion market of Chinese. This is a huge win for Wall Street. It remains to be seen if the opening up is as smooth and comprehensive as the deal suggests. US firms have long complained that while they have access to China, they are treated unequally and at times unfairly by China’s legal system and some regulators.
Overall, the big winners with this deal are the President and his Wall Street counterparts. The Chinese win a reprieve in the trade war and a reduction in tariffs.