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Tension reignites between two largest economies, U.S and China

Tensions have been reignited between the United States and China. The world’s greatest economies are in a state of anguish as a result of accusing each-other on various occasions since the virus spread and became a pandemic.

The virus has affected both countries as their economies have fallen into the deepest contractions since decades. This has contributed in destroying several employment opportunities. China has almost recovered from this pandemic as the number of positive cases have largely declined but other countries are still facing tremendous difficulties to rekindle their economies such as the U.S.

President Donald Trump’s recent threat of new tariffs on China will cause more inconvenience and affect their present tensed situations.

“Clearly, the timing of renewed trade tension could not be worse,” economists   of S&P Global Ratings said earlier this month. The threat of higher tariffs and the intensifying technology cold war could yet disrupt technology trade and investment, de-powering what still promises to be an engine for recovery in 2020.”

In January the deal only reduced some of the tariffs each side had placed on the other, it allowed Beijing to avoid additional taxes on almost $160 billion worth of goods. China had made a commitment to the US of buying $200 billion goods and services for two consecutive years.

According to the S&P economists, China would have had to increase its imports more than 6% each month for two years to honor the terms of the deal struck between the two countries. Instead, US imports fell 6% during the first four months of 2020.

“With consumer demand down in the Chinese economy, it’s unlikely that Beijing will be able to commit to buying more American goods or if they do commit … they will renege later” because of the lack of demand said Alex Capri, a trade scholar and visiting senior fellow at the National University of Singapore Business School.

Trump also does not have the next two years to find out whether China will honor its agreement or not. He will have to face the elections next in November.

 

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