The pre and post-Trump election scenarios in the US in terms of economic relationships and especially with China. Thankfully Trump hasn’t lived up to his rhetoric about trade and particularly about trade with China in his first 100 days. Several threats made during his campaign like imposing protectionist measures against China and defaming China by calling it a currency manipulator have only remained pre-presidential rants. The business ecosystem has been breathing airs of relief as this was a sensible adjustment because they know the impact such controversial steps could cause. Also with his emphasis on making America’s budget deficit-free by 2027, this seemed to be the right direction.
Globalists clearly have dominated nationalists in this first lap of administration. Though no trade measures were taken against China, high-level talk still continues echoing the past tunes of Bush and Obama. The topic of concern, the trade imbalance between the two nations, however, has been addressed this time and both the parties have agreed to come up with a 100-day action plan.
Other than these a substantial step has been taken by Trump and that is a series of studies about the source of Trade deficits in terms of products and countries. To some extent, these studies are a delaying tactic. But, one should understand the importance of proper research before taking action especially at the level of International relationship. As the results pour in, strategies become more rigid. The dangerous scenario would be if there is little progress in the economic dialogue with China, a rising trade imbalance between the two, and detailed ideas about import restrictions emerging from the studies. The imbalance will be affected by macroeconomic developments: if there are a fiscal stimulus and monetary tightening on the U.S. side, it is very likely that the U.S. trade deficit with the world and with China will expand, irrespective of any marketing opening moves by China. The truce in U.S.-China trade may prove to be only temporary.