Following the initial round of U.S.-China trade negotiations, both sides agreed to cancel or suspend certain tariffs. Economist Andy Kwan Cheuk-chiu argued that the U.S. "miscalculated," initially believing it could rally other nations to isolate China. However, China held firm, leaving U.S. President Donald Trump facing rising inflation and bond yields. Chow described the outcome as a strategic misstep, forcing the U.S. to retreat hastily.
Another economist, Terence Chong Tai-leung, noted that the 90-day suspension of reciprocal tariffs means China has only "won the first round," with uncertainties remaining in the ongoing rivalry.
Failed Attempt to Isolate China
Kwan, Director of ACE Centre for Business and Economic Research, explained that the U.S. launched tariff wars expecting global compliance to dominate decision-making and isolate China. Smaller nations reliant on U.S. protection lacked bargaining power and reluctantly complied. However, China's steadfast stance and delayed cooperation from other countries exacerbated the negative impacts of U.S. tariffs, including domestic inflation and rising bond yields. This forced the U.S. to backtrack, slashing most imposed tariffs.
A Temporary Truce
Chong, Executive Director of the Lau Chor Tak Institute of Global Economics and Finance of CUHK, analyzed that the latest agreement essentially reverts tariffs to pre-April 2 levels, marking a short-term victory for China. However, he emphasized the 90-day suspension is a tactical pause. With China lifting rare earth export restrictions, the U.S. may seek alternative suppliers during this period. If successful, Chong warned, the U.S. could reimpose tariffs up to 145%, urging vigilance over the next three months.
Amid continued tensions, Chow highlighted China's efforts to diversify trade partnerships, reducing reliance on the U.S. from 19.2% (2018) to 14.7% of total exports. He urged expanding into Southeast Asian and European markets, advising Hong Kong exporters to follow suit. Chong recommended targeting buyers in Southeast Asia, the Middle East, and Europe to mitigate risks. Both experts stressed adaptability in navigating the evolving trade landscape.
(Source: Ta Kung Pao)
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