Fears of an escalating US-China trade war are weighing on the markets this morning, after the two powers clashed at a major summit over the weekend.
US vice-president Mike Pence challenged Beijing’s trade practices at the Asia-Pacific Economic Cooperation (APEC) in Papua New Guinea, criticising China for engaging in forced technology transfer and intellectual property theft.
He told delegates that:
The United States . . . will not change course until China changes its ways.
“We have great respect for President Xi and China, but as we all know, China has taken advantage of the United States for many, many years and those days are over.”
Chinese President Xi Jinping was equally combative, criticising Washington’s aggressive actions on trade. He argued:
Unilateralism and protectionism will not solve problems but add uncertainty to the world economy.
History has shown that confrontation, whether in the form of a cold war, a hot war or a trade war, produces no winners.”
But in an unprecedented move, the APEC leaders actually failed to sign off the traditional end-of-summit communique; a sign that cooperation was in short supply.
One insider told CNN that Chine baulked at a line in the statement that read “We agree to fight protectionism including all unfair trade practices”, taking it as a deliberate attack at China.
Economists has hoped that the APEC meeting might have thawed relations between the two major powers. That could have helped to de-escalate the trade wars, paving the way for a formal breakthrough at this month’s G20 meeting of world leaders.
Instead, there’s a growing risk that president Trump imposes further tariffs on Chinese exports to America, which would have a further chilling impact on trade and global growth.