Raging US-China trade war scuttles APEC joint communique

SINGAPORE (ICIS)–No resolution to the US-China trade war seems imminent as US vice president Mike Pence and China President Xi Jinping sparred at the recently concluded Asia Pacific Economic Cooperation (APEC).

For the first time in its 29 years, the 21-member APEC group was unable to issue a joint communique after the Leaders’ Summit held in Port Moresby, Papua New Guinea on 18 November.

It seems to have set the tone for the next meeting of US and China leaders on the sidelines of the G20 summit in Argentina on 30 November.

“We all have to hope it goes in a constructive direction. Because otherwise, the loss to the parties, the America and China, as well as to other countries like Singapore and everybody else in the region and in the world will be considerable,” Singapore Prime Minister Lee Hsien Loong was quoted in the local news daily Straits Times as saying.

Although the leaders of the two world economic giants are willing to engage in discussions, these occasions have not yielded results to cheer up the rest of the world. Neither the US nor China would budge on their previously stated positions.

“The United States … will not change course until China changes its ways,” Pence had said in his APEC speech.

The war of the titans has dire global economic consequences the longer it lasts. Concerns are growing that a global economic slowdown is in the offing as a direct result of this trade spat.

“A global economic slowdown is upon us … We expect it to be gentle but downside risks are accumulating,” Japanese brokerage Nomura said in a research note.

An escalation of the trade war appears inevitable as the rate of US tariffs on $250bn worth of Chinese goods will increase to 25% in January 2019 from the 10% set on 24 September.

A total of $360bn worth of goods between the two have been slapped with tariffs since the trade war began on 6 July, precipitated by the US under President Donald Trump in his quest to bring down China’s massive trade surplus with the US.

In 2017, US imports of Chinese goods stood at more than $500bn, while China’s imports of US goods were about a fifth of that number.

“We have taken decisive action to address our imbalance with China… We put tariffs on $250bn in Chinese goods, and we could more than double that number,” Pence had said at APEC.

Trump had warned that tariffs would be imposed on an additional $267bn worth of Chinese goods, in response to China’s latest retaliatory action.

“No one expects the talks [on sidelines of G20 summit] to prevent the US tariffs on $200bn from moving up to 25% from 10% on 1 January 2019. If, however, both leaders can agree on a framework for further talks to resolve trade tensions, Trump might hold back on hitting the remainder $267bn of Chinese goods with tariffs,” Singapore-based financial institution DBS Group said in a research note.

“The US economy is set to hold up better against the growth moderation in the eurozone, Japan and China,” it said.

China, which is the world’s second-biggest economy, is slowing down as a major growth pillar – exports – is under direct attack amid the trade row with the US, and is bent on revving up domestic consumption to prevent a hard landing.

Its southeast Asian neighbours will not escape unscathed by the US-China trade tensions, according to Spain-based research firm FocusEconomics.

“An escalation of the trade war between the US and China is the significant downside risk to growth, given that both countries are key export markets,” it said in its Consensus Forecast ASEAN report for December.

Click here to view related stories and content on the US-China trade war landing page.

Pictured: Papua New Guinea’s Prime Minister Peter O’Neill meets US Vice President Mike Pence at APEC
Source: Mick Tsikas/EPA-EFE/REX/Shutterstock

By Pearl Bantillo

Additional reporting by Nurluqman Suratman