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U.S. - China Trade Negotiations Update

Jerusan Jegatheeswaran Co-VP Education/ Research, Dragos Cada Co-VP Education/ Research, Alice Li Research Analyst, Amy Li Research Analyst, Helen Feng Research Analyst, Julia Tu Internal Analyst

Final Stages of Trade Negotiations

As the end of the month approaches, U.S. and China are reaching the final stages of their trade negotiations and the two countries have planned a summit for the end of March at Mar-a-Lago. U.S. and China have been in a locked stalemate on issues of forced transfer of technology and intellectual property. Both countries have been imposing tariffs on each other’s imports which has produced unfavorable results for both countries as well as the global economy as a whole. Specifically, there has been a disruptive effect on the automotive industry, as China is the biggest car-buying and producing market in the world. These tariffs have resulted in uncertainty for investors and consumers, causing them to hold off on spending and thus creating even more negative macroeconomic effects.

Potential Outcomes of a Deal

If a deal is reached, the US could be cutting back as much as $200 billion tariffs on Chinese goods and China may be removing industry specific levies, like autos. China’s congress may also be passing a new foreign investment law that will change equity ownership rules. However, if the talk fails on the topic of enforcement mechanisms of intellectual property, U.S. is considering re-implementing tariffs on China.

Impacts of a Deal on Markets

National Economic Council Director Larry Kudlow holds an optimistic opinion on a deal, stating that that the countries are making "fantastic" progress towards an agreement and that China has expressed willingness to prevent intellectual property theft and make other key structural changes. The ongoing trade negotiations between the two countries has kept investors on edge as they assess how tighter trade conditions might impact future corporate profits. Furthermore, U.S. farmers and others who have been suffering from the tariffs imposed by China are hoping for relief from these trade negotiations. Although this appears to be the end of a trade war that has hurt financial markets and dented economic activity worldwide, many still believe that it won’t prevent the slowdown already seen in the global economy.