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Why Trump’s trade truce talk is too late for the global economy

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Has the sharp decline in America’s stock market – still down almost 9 per cent from its peak at the beginning of last October, despite a fierce rally since Christmas – given President Donald Trump a stronger incentive to strike a trade deal with China?

Having treated the benchmark S&P 500 index as the best measure of his administration’s performance, Trump has been rattled by the recent slump in America’s once-resilient equity market, according to White House officials, and is reportedly more willing to de-escalate the conflict. An article in The Wall Street Journal last Thursday suggesting that Treasury Secretary Steven Mnuchin was mulling scaling back tariffs on Chinese imports, coupled with a subsequent report by Bloomberg claiming that China has proposed measures to eliminate its trade surplus with America, are fuelling optimism in markets that a trade truce is at hand.

Leaving aside the strong resistance to a climbdown on tariffs from the trade hawks in the administration and the much bigger challenge of resolving the underlying problems bedevilling US-China relations, any easing of tensions in the coming weeks will do little to reverse the slowdown in the global economy over the past year. While the blame for the current growth scare cannot be pinned entirely on Trump’s trade offensive, his brinkmanship has done a grave disservice to the global economy, so much so that America’s own performance has suffered.


© South China Morning Post