President Donald Trump will meet with President Xi Jinping of China at the G-20 summit in Argentina. He has been presenting a tough façade and threatening to impose higher tariffs, but there is underlying anxiety on the costs of a trade war and how it will affect the economy and the financial markets.
A lot of American officials have said that this presents an opportunity for a truce between the two countries. There might be an agreement between the two countries that will delay new tariffs for several months while the two countries figure a way to sort things out.
But things are not certain as some officials of the Trump’s administration are not impressed by the response of the Chinese to pressure from Trump as they say that not much will happen to stop China from stealing American technology or engaging in other trade practices.
Recent issues like the increase in interest rates, stock market fluctuations, and thousands of layoffs by General Motors have disturbed Mr. Trump, and he wants to emerge with a good deal from his meeting with Mr. Xi.
Larry Kudlow who is the chief economic adviser to President Trump has said that there is a good possibility that a deal would be made. But if a deal is not made, Trump will happily continue with his tariff policies.
The Trump administration plans to increase existing tariffs on about $250 billion worth of Chinese goods from 10% to 25%. Trump has also threatened to impose tariffs on an additional $267 billion of Chinese goods. But experts fear that this might turn things to a full economic Cold War.
But if the two leaders talk, President Trump might postpone the increase to 25%, and there won’t be new tariffs for a while. This is quite similar to the deal that Trump struck with the EU where he agreed to delay tariffs on cars in return for a pledge by the EU to buy natural gas and soybeans from America.
But, there are divisions inside the White House on the trade wars, and senior White House officials have conflicting opinions on the trade war. Mr. Kudlow and Steven Mnuchin, the Treasury secretary have more mainstream advisers, but others like Peter Navarro who is the director of the White House trade office has called for an increase in pressure on China till China gives in.
United States trade representative, Robert Lighthizer is on the side of the hardliners and opine that America should drive a hard bargain. But Mr. Steven Mnuchin opposes Mr. Lighthizer and sees him as one of the globalists that want Mr. Trump to compromise on his promise to make things tough for China.
In the past, Trump had said that trade wars were easy to win, but now his position is changing. He is now aware of the economic dangers of a trade war, and he is now receptive to the counsel of moderates like Mr. Kudlow and other experts like Mr. Stephen Schwarzman, a Wall Street financier.