“It’s a long-term issue where we and Chinese are going to have to figure out how to deal with one another not just over months or years, but even decades,” said Christopher Smart, head of Barings Investment Institute, on Yahoo Finance’s YFi AM.
American presidents’ efforts to address the rise of China is nothing new. Smart said Bill Clinton may be credited as the first president to lead the charge. In 1998, Clinton historically met with then Chinese President Jiang Zemin, but Smart deems President Trump’s “tactics” are different this time around.
After both Trump and Xi Jingping reached a temporary truce in December to hold off on tariff hikes for 90 days, the deadline extended to March 1, 2019. In the time between, delegates from both U.S. and China officials met in Beijing to identify key areas including protection of intellectual property and other technology related to national security issues. After no deal was reached, Trump took action.
This month Trump increased tariffs on $200 billion of Chinese goods from 10% to 25%, leading China to respond with plans to raise tariffs on $60 billion of U.S. goods starting June 1.
The administration’s latest escalation in its battle against Huawei – adding the company to a trade blacklist – was “a significant expansion of the friction we’ve had between the U.S. and China, and markets are saying this is complicating the relationship significantly," Smart said.
‘There will be an impact on American households’
Americans could soon see a direct impact from the ongoing trade war. The second round of tariffs applied to Chinese imports are increasingly going to hit consumer goods, said Smart, who served as a senior economic policy official at the U.S. Treasury and White House. “There will be an impact on American households,” he said. And on U.S. companies as well, as was the case with several chip makers that stopped supplying Huawei with components amid the latest U.S. crackdown against the Chinese telecom giant – shares of suppliers dropped Monday.
“We’re not doing them any favors and they’re not doing us any favors,” Smart said. “The commerce is usually because of some bilateral benefit, but when you interrupt that, there is bilateral harm.”