Tech companies welcome truce in trade war
July 9, 2019 Category Foreign trade, Weekly
Tech companies in the U.S. and China, which are among those most directly affected by U.S. tariffs and Huawei restrictions, were quick to welcome the temporary truce in the trade war between the U.S. and China. On the sidelines of the G20 meeting in Osaka, U.S. President Trump agreed not to impose 25% tariffs on an additional USD300 billion worth of Chinese imports “at least for the time being”. He also said that U.S. companies could resume sales to Huawei Technologies provided these did not threaten U.S. national security. Even as business groups and analysts welcomed the announcement, most noted that the hard work lies ahead for both countries to solve the difficult issues, including intellectual property protection, industrial and government espionage, state company reform, subsidy policies, punitive tariffs, and investment and trade restrictions.
Gao Feng, Spokesman of the Ministry of Commerce (MOFCOM), said that before China and the U.S. could reach a trade deal, the U.S. must eliminate all tariffs that have been imposed on Chinese imports. U.S. President Donald Trump previously said that he wanted some tariffs to remain in place for a ‘substantial period of time’, even extending beyond any agreement. U.S. and Chinese officials will talk by phone in the coming week as they seek to resolve the trade war between the two countries and will be scheduling face-to-face meetings, said Larry Kudlow, Trump’s Chief Economic Adviser. He was referring to the resumption of trade talks as early as this week.
Chinese official media outlets toned down expectations that President Trump would lift restrictions on Huawei. The company itself commented: “We acknowledge the U.S. President’s statements and have no further comment at this time.” It is still not clear which products will remain restricted and to what extent Huawei’s core network and 5G base station business may still suffer from the ban. Larry Kudlow said that Huawei will remain on the U.S. blacklist, and “what’s happening now is simply a loosening up for general merchandise”, such as generally available chips and software.
Ho-Fung Hung, Professor of political economy at Johns Hopkins University remarked: “They have a kind of truce and say they’re going to continue with the negotiations. It’s the best people can expect. There was no significant progress in anything.” Many U.S.-China differences are so deeply entrenched that a quick deal will not work, said Yukon Huang, Senior Fellow at the Carnegie Endowment for International Peace and former China Country Director at the World Bank. The impediments include entrenched tension, unrealistic expectations, finding a mutually agreed way to arbitrate disputes, realizing that innovation in each country benefits the other, and addressing America’s low savings rate and high budget deficits that really drive its trade deficits, he said. Jian Chang, Chief China Economist at Barclays, said that the truce agreed in Osaka “does not necessarily increase the likelihood of a deal being reached. It is probably in the best interest of both parties to keep the talks running as long as they can.”
In his latest remarks on the U.S.-China trade war, President Trump said that the U.S. should start manipulating the dollar, accusing China and Europe of playing the ‘big currency manipulation game’. This would directly contradict official U.S. policy not to manipulate the dollar’s value to gain trade advantages. The U.S. Treasury Department earlier found no country meets the criteria for being labelled a currency manipulator, but put China and eight other countries on watch list.
The actions of the United States have contributed to the “downward spiral” in the country’s relations with China, according to a group of 100 American academics, foreign policy experts and business leaders. In an open letter addressed to President Trump and members of Congress, and published by the Washington Post, the signatories wrote: “We are deeply concerned about the growing deterioration in U.S. relations with China, which we believe does not serve American or global interests.” Signatories of the letter include Susan Thornton, former U.S. Assistant Secretary of State for East Asian and Pacific Affairs, and J. Stapleton Roy, former U.S. Ambassador to China. “Although we are very troubled by Beijing’s recent behavior, which requires a strong response, we also believe that many U.S. actions are contributing directly to the downward spiral in relations,” it said. The letter said also that fears China would replace the U.S. as the global leader were “exaggerated”, as it was not clear if Beijing wanted or was able to achieve such a position. Chinese Foreign Ministry Spokesman Geng Shuang said that he supported the “rational and objective voices and opinions” in the letter. Michael D. Swaine, Senior Associate at the Carnegie Endowment for International Peace, said that the letter is proof positive that there is no consensus behind the extreme policy stances” toward China now evident in Washington.
People’s Bank of China Governor Yi Gang – at an event in Helsinki – said the result of the meeting of Presidents Trump and Xi in Osaka was “a little bit better” than expected, but stressed that difficulties remain ahead in solving trade tensions with the U.S. Yi said he will remain cautious in the future because structural and fundamental issues remain. On the domestic economy, Yi said the central bank’s interest rates are at a comfortable level, economic growth is close to its potential and the current policy stance is enough to deal with different situations. Yi’s comments signal that policymakers won’t necessarily adopt broader easing measures if the risks from the trade war remain constrained. He also pointed to the growing importance of consumption as a driver for growth.
In a possible new security incident, Google has denied contributing expertise to the Chinese military after taking part in research that could be used to sharpen the accuracy of China’s new stealth fighter jet. Zhai Shumin, a lead scientist from Google, took part in a research program in Beijing with applications that include the military, medicine and education. The research paper about the development of new computer-human interaction technology focuses on a smart target-selection assistant that can speed up on-screen mobile target selection by more than 50% and improve accuracy by nearly 80%. A Google spokesperson said there was nothing in the paper that referred to a military application.
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