Trade deal sticking pointsThe longer-run conflict between China and the US over technology will likely continue. In the short term, the two key obstacles to reaching a temporary agreement are:
- China’s demand for scrapping all tariffs, which the US is resisting
- the US’s insistence on China enshrining its commitments in law, which Beijing sees as an infringement on its sovereign power.
Shifting risksAll this suggests that a temporary trade deal may be on the horizon, and the purpose of the deal, in my view, is to set the stage for further negotiations on deep-rooted issues related to Sino-US high-tech competition. Despite this short-term improvement in sentiment, the China-US “tech cold war’ is likely to get colder because the trade war is only a manifestation of economic and political ideological differences that have threatened the national security of the two countries. The truce will only change the trade war impact from the macro level in terms of market volatility to the micro level in the technology sector. It provides temporary relief to the markets, but does not end the war for economic and technological dominance.¹
---¹ See “Chi Flash: Sino-US Trade War: Truce For Now But Risks Have Mutated”, 4 December 2018
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