Who is losing trade chess between China and the US? Economist clarifies moves

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WASHINGTON DC – The United States is losing its tariff war on China, according to the director of the Latin American Economic Observatory (Obela).

What to expect in the face of a new round of trade tariff increases between the two economic giants?

“By imposing tariffs, the deficit is expected to narrow, but that is not happening. The US is not closing the gap with China, at least significantly,” Obela’s coordinating economist Oscar Ugarteche said.

The US trade balance with China showed that President Donald Trump’s initiative to oppress imports of Chinese products has widened the trade deficit with the Asian giant, according to 2018 data.

“US GDP growth is already progressively slower and since the second quarter of 2018 has been slowing. The investment rate has fallen and [the US] cannot control the large trade deficit,” explained Ugarteche, who is also part of the Institute of Economic Investigations of the National Autonomous University of Mexico (UNAM).

In this context, the outlook has no tendency to improve on the announcement of a further increase in trade tariffs between the two countries in two periods (one was on September 1 and the next increase will be on December 15) of rate increase to 15%.

In which areas of production does the US want to brake China?

For the economist, the tariff war seeks four things.

The first would be the breakdown of China’s mobile phone industry, made evident by the ban on trading Qualcomm and Broadcomm chips with Chinese companies and Google’s veto of licensing Android on Huawei smartphones.

The willingness to halt China’s advance in clean energy design would be a second US goal with the trade war.

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According to Ugarteche, products that China cannot buy from the US are used to make photovoltaic cells and other non-petroleum based energy forms.

“This could impact China’s ability to introduce clean energy into the world, which is one of its goals,” he said.

Disputes over 5G technology and the telecommunications sector are the third goal. Obela’s economist noted that the development of the 5G network, run by Chinese company Huawei, left “US companies shaking hands without completing the task of putting this network on the market at a reasonable price.”

Finally, the tariff war still seeks to counteract the advance of the China-led electric vehicle industry, a country with about two million domestically produced electric cars.

“These are automobiles made in China , with Chinese technology and Chinese brands. That lowers US competitiveness,” he said.

What is the impact of the war between China and the US on consumers?

Oscar Ugarteche considers that, in addition to the increase in consumer prices – which generates inflation, tariffs have an impact on consumption itself.

“With rising prices, consumers stop buying the product. This will create a drop in investment, which is already observed in the US, but will have a massive effect,” warns expert, who considers to be “very serious.”

“The United States has engaged in a war with an underrated player. In every American chess move, China responds and defends itself by being prepared for the move,” the economist concluded.

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