Financialist: US-China trade tensions grow

18th September 2012

Eswar Prasad, Senior Professor of Trade Policy at Cornell University told CNBC: "The timing probably has a lot to do with the political season, especially with many battle grounds where manufacturing is very important, coming to play in the U.S. presidential election…I think we'll see a lot more of this in the next couple of months but I sense after the elections, the temperature will cool down a little bit."

Similarly, Liu Jie, a journalist for Xinhua, argues that the move is likely the result of political manoeuvring between President Barack Obama and his Republican opponent Mitt Romney during their respective presidential election campaigns:

"Both candidates are competing to find new scapegoats for their inability to handle domestic economic woes, as well as avoid being seen as too soft when dealing with China. Bashing China's auto industry may prove to be useful for Obama in swing states like Ohio, where many people work in the industry."

But more importantly, she writes, "In the past three years, similar trade remedy probes covering wind turbines and solar panels have shown how a "get tough" policy on Chinese exports has not only failed to get the U.S. economy moving, but actually raised prices for consumers and ignited a trade war between the world's top two economies."

The Guardian's Larry Elliot argues, however, that there's more to the trade dispute than politics:

"A low-level trade war between the two economic superpowers has been long simmering…….In truth, China's use of subsidies has been less important than its manipulation of the exchange rate to ensure that exports to the US remain cheap. Keeping the yuan artificially low has been remarkably successful in getting tens of millions of Chinese people out of the fields and into the factories, but it has created real tensions with a US policy elite convinced that China is using unfair means to challenge American economic hegemony."

"So while Obama's gambit may pay off in the short run, the bigger issue of the dollar-yuan exchange rate will remain contentious long after a settlement has been agreed at the WTO and the US election is safely out of the way."

 

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