Trump's Cancellation of Additional China Tariffs Just a Delaying Move - Prof.

US Secretary of State Mike Pompeo said that Washington and Beijing could possibly agree on a trade deal in the coming weeks. Pompeo noted that a lot of progress has been made in US-China talks. Sputnik has discussed the possible deal with Dr Wendong Zhang, Assistant Professor of Economics and Extension Economist for Iowa State University.
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Sputnik: Now the preliminary reports say that China-US have a good chance of achieving this deal, yet some analysts say it will bring a little change that the US was hoping for. What’s your particular take on this assertion now?

Dr Wendong Zhang: I think in general there is good progress made towards a trade deal, but my opinion changes when you’re looking at the different components of the trade deal. When it comes to Chinese willingness to buy more American products, especially agricultural products, I think China always has the ability and money to do that. My concern is, for example, for soybeans the peak purchase season is already gone for the 2018 crop. So this agreement, if signed, won’t do much for this year’s crop. And what China cannot do a whole lot is if US want China to give up support or pledges to not develop some critical technology component then, for example, the industrial subsidy for key technologies I think those are harder things to negotiate.

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Sputnik: The United States still wants China to honour certain pledges such as to buying more American products. How good are the chances that Washington will get what it wants from Beijing? We're still very much in the clear not withstanding what your previous answer was, do you think these pledges are going to be concluded and affected by the Chinese side?

Dr Wendong Zhang: Yes, I think it’s always part of the Chinese plan that is back about half a year ago when China reached one plan when China agreed to buy 7 billion more of farm and energy products, especially agricultural products for soybeans, and for ethanol, and for potentially for corn, for China's new corn ethanol mandate there is a greater need for US products. So there is general interest by the Chinese to expand and maintain the relationship of between United States and China and agricultural exports is one critical thing. What China probably wants to do is, China also feels they are limited in terms of the ability to buy more high-tech machinery stuff that currently they cannot do due to national security reasons.

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Sputnik: It would be interesting to actually get your understanding on how this particular tariff  affected the two nations in the agricultural sector, what’s your knowledge of the damage that it’s done. Has it done significant damage to the American side? We're not hearing too much, obviously, President Trump is trying to keep this under wraps if there has been damage but what’s your knowledge that you can share with us?

Dr Wendong Zhang: We have done extensive study and what we find is on the general economy side there’s no doubt that the Chinese economy will be hurt more, but I think the agricultural sector and agricultural states like Iowa where ISU is located will definitely be affected greatly. What we find is due to the trade war Iowa’s economy will lose about $1 to $2 billion out of the $190 billion pie that's about exceeding 0.5-1% of the state GDP due to the trade war with China. So it’s much higher damage relative to less than a quarter of a percent when you're examining economic impact on the general economy of the United States. So that's why we see a lot of more worries and concerns among the agricultural sector, and agricultural states like the heartland area.

Sputnik: It’s similar, I suppose, to many relationships once it is damaged the love never tends to fully return and this is the same with China and America I suppose. What are the chances that not all tariffs will be removed as to maintain pressure on China? I can’t see the dynamics of returning to the previous status quo, what’s your particular take, will some tariffs still remain even after a negotiated settlement?

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Dr Wendong Zhang: I think that it is very likely actually that some of the tariffs will remain on, because especially during the later rounds of negotiations both sides will talk about that they want some sort of verification and some assurance and even if some of the tariffs are removed then there will always be a threat to say that if the other side didn’t do what we agreed on, then the trade war is back on. So even the most recent positive development is saying that it’s not a cancellation of the additional tariffs it is just a delaying move, if you read closely what President Trump is talking about from the US side. So I think it’s highly likely that we’re not seeing a full defuse of the trade war but some de-escalation.

The views and opinions expressed in this article are solely those of the speaker and do not necessarily reflect Sputnik's position.

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