The strains in US-China exchange relations compromise the whole worldwide economy, not simply the relations inside the Group of Two. As a result, many experts and analysts around the world are trying to predict the possible options for the development of a trade war and its end. These outcomes are divided into positive and negative. There are many more options for negative outcomes than positive ones.
4.1 Negative outcomes of the conflict
Temporary Armistice Before US Elections
One of the main factors for the global economy and markets this year is the US elections in November. To be re-elected for a second term, Donald Trump needs to prevent a recession and a fall in the stock market. Experts believe that the conclusion of the first part of the deal with China is largely due to the fact that further escalation of the conflict could damage the US president’s election campaign. As a result of the agreement, both parties gained time, stabilized the situation in the economy and in the markets.
At the same time, skepticism regarding the ability and desire of China to fully fulfill its part of the agreement and increase the import of goods and services from the United States by $ 200 billion over two years predominates among experts. In the base case scenario, a truce can be expected to last until the end of 2020. However, after Trump is re-elected for a second term, the conflict could erupt with renewed vigor.
In addition to the trade and technology front, Washington’s political and financial pressure on Beijing is likely to increase. In November, the United States passed a law that would check every year that Hong Kong’s independence from Beijing is sufficient to maintain trade preferences. Hong Kong’s loss of international financial center status would seriously damage investment in mainland China. Washington was also considering restrictions on portfolio investment in China. The delisting of Chinese companies from US exchanges was discussed, as well as the restriction of the presence of US pension funds in the financial market of China (Cyrill, 2019).
Thus, in 2021, the return of the active phase of the confrontation between the United States and China and a sharper slowdown in the global economy can be expected.
Also it is worth to mention that according to a few experts, the response of China inside the trade warfare with the US may additionally be extra painful for the American economic system than for China. American businesses will partially lose their consumers in China due to nationalistic appeals to boycott products of American organizations, along with Apple, McDonald’s, KFC. Alongside with that, the internal China’s demand for the goods restricted by the US (e.g. ZTE and Huawei) is increasing (Vanham, 2019).
A new round of trade war over coronavirus
The spread of the coronavirus stamp COVID-19 began with a Chinese laboratory in Wuhan, said US Secretary of State Mike Pompeo. According to him, “substantial evidence points to this, and there is no reason not to believe them.” He added that the ruling party of China did everything possible to prevent countries from learning about the situation with coronavirus in a timely manner. As a result of misinformation, thousands of people were affected both around the world and in the United States, Pompeo emphasized (The Guardian, 2020).
In early May, it was reported that the US Administration was preparing measures against China in connection with allegations of hiding information about the coronavirus. Among the options under consideration: the introduction of sanctions and new rules in the field of trade, as well as the annulment of US debt. All this can lead to the beginning of a trade war between the United States and China
Leading analysts say that now the likelihood of a new round of trade war between the United States and China is higher than ever. Moreover, if in the first half of last year, the trade confrontation took place, first of all, due to the trade deficit and the US’s accusations of theft of intellectual property by China, then a new round of the trade war may result from well-founded suspicions that the origins of COVID-19 are not in the seafood market in Wuhan, and in a research lab. This accusation is far more serious, as the United States has suffered significant damage from the consequences of the pandemic.
It is also assumed that if China does not provide evidence in favor of the incorrectness of the American position in the coming month, this will cause a serious political and economic crisis. First of all, it will hit the stock and commodity markets. The situation could be aggravated if the countries of Europe and the closest trading partners of China join the accusations made by the USA and want to receive compensation for the losses incurred due to the pandemic (Caporal, 2020).
The trade war will grow into Cold War II.
Social conventions and social qualities in the US and China are different. The nations won’t surrender their political and monetary frameworks and won’t change them as per the practices forced of recommended by the contrary side. China should diminish export oriented creation.
The US will encompass China “with powerful American military capabilities, creating NATO-like adversarial alliances, isolating it economically and imposing costs when it did things the US did not like”.
China, in its turn, will try to endeavor to push the US out from the APR. The US will clarify its one-sided sanctions with the ability to strike better arrangements, to arrive at a fair arrangement with China, however serving the interests of the US economy. The nation will accomplish its objectives by introducing ultimatums to its exchange accomplice, if their national advantages or security are considered hurt. Therefore, an ever increasing number of worldwide issues will be tended to by associations of nations not including the US. The US will be step by step getting disconnected in the global network. The job of the US in worldwide gracefully chains and global exchange will diminish because of the weakening of the nation’s power. The US might be barred from various local exchange and financial relationship of nations.
At the point when some US organizations are winning, others endure misfortunes. There is developing discontent among American business network and their abroad accomplices.
The US government security market will endure, expansion rate in the residential purchaser market will increment. The danger of one-sided monetary approvals forced by the US will push different nations to look for elective providers and markets.
China has become a pioneer in the Regional Comprehensive Economic Partnership (RCEP) of 16 nations, the size of which extended past the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) without the US: 30% of worldwide GDP, half of the world population. Trading to RCEP nations from the PRC represents 26% of the complete China’s fares. The development of mega-union will reinforce the main job of China in the locale, however then again, may likewise cause an abatement in worldwide exchange principles, since it doesn’t cover issues of work, human rights, online business, open acquisition.
Simultaneously, China’s speculation atmosphere will endure, the usage of the “Made in China – 2025” plan is under the danger of disappointment, which may hinder mechanical advancement in the nation. China has step by step expanded its use on R&D, however it despite everything falls behind the US. As per Kerry Liu, taking into account the significance of Made in China 2025 to monetary future, it will be hard for China to make considerable concessions during the exchange war (Kapustina, Lipková, Silin, & Drevalev, 2020).
4.2 Positive outcomes of the conflict
Agreement to turn away the trade war will be reached
The trade war will end with a trade-off. It is conceivable if the US figures out how to regard the other gatherings’ center advantages and significant concerns. China has just announced its status to open its vehicle advertise, change the financial segment, reinforce the insurance of licensed innovation rights, and breaking point the exchange of American advancements to Chinese business. China may consent to purchase as a significant part of the agrarian produce from American ranchers as they can gracefully.
China is happy to look for a trade-off and is prepared to expand imports of products and enterprises from the US, chop down government appropriations to its organizations, and make the exchange of American innovation increasingly straightforward. Be that as it may, it isn’t probably going to drop the expanded import levies recently presented by the US. The situation doesn’t prohibit the likelihood that the exchange strife can be solidified up for an extensive stretch of time.
The two nations are profoundly keen on sending out items and administrations on a respective premise and in creating worldwide flexibly chains. The arranged settlement understanding and the finish of the war is conceivable, since the two nations will lose beyond what they can pick up because of the war. We can expect that China and the US will stay key accomplices regardless of the expanded rivalry between them. Business-to-business ties will turn out to be nearer, and shared comprehension of societies will improve.
China will build imports of agrarian crude materials and food, just as cutting edge items. The US organization will keep up a relationship of trust with significant exchanging accomplices and will keep away from forcing one-sided sanctions, along these lines coming back to regarding the WTO rules. The biggest American organizations will assume a significant job in this procedure by campaigning and advancing facilitated commerce and passing on the possibility that an exchange war against the entire world isn’t advantageous for the US (Kapustina, Lipková, Silin, & Drevalev, 2020).
In my personal opinion, a negative outcome of the conflict is more likely than a positive one, given the current world events and the new contradictions between the US and China. The most expected scenario is that trade war between China and the United States will shift to a new level due to the coronavirus. Of course, a tough trade and economic confrontation between the United States and China can develop into a military-political conflict and direct clash and military confrontation cannot be ruled out in principle.
Nevertheless, it seems to me that neither side is interested in such an extreme form of conflict. A complete break in relations between the two countries will lead to serious losses for both countries, and this, in turn, can lead to a military-political conflict. That is why such a radical scenario is unlikely.
The most probable type of encounter is an enormous scope trade war, which will involve genuine results, since countries are still in profound financial association. Considering recent statements by Trump that in the event of a pandemic coronavirus blame the Chinese authorities, it is possible to make the assumption that there will be a new round of trade war for this reason.
Notwithstanding the trade war, the Trump administration and Congress have taken different activities identified with financial relations with China planned for fixing the guidelines for both investment and trade, including information and innovation. China said it might want to examine these issues in negotiations. In any case, all things considered, the two sides will experience troubles in finishing up a transaction. As far as it matters for its, China is in a position where it doesn’t have numerous choices, as its economy has experienced the trade war. Be that as it may, any appearance of unmistakable intimidation in the United States will be politically hurtful to the Chinese leadership. President Trump, then again, doesn’t appear to be eager to settle on essential trade issues.
Another important factor in the current situation is that the presidential election will be held in America in the fall of 2020 and Donald Trump will be re-elected to the presidency. The outcome of the US presidential election will also play a role in the further development of the trade war with China.