US-China to Have Major Global Implications says Brookings Institute

Some participants were of the view that the current tensions between China and the United States were as much about jostling for strategic space as they are about trade, and that trade had become a tool for wider strategic competition. Certain sections of the U.S. population feel threatened by the rise of China and want to see the Chinese contained. The U.S. would also like to see changes in China’s economic structure and not just a reduction in its trade deficit. China on the other hand would likely be less willing to negotiate on structural changes like the Japanese did in the 1980s.

In terms of future projections, it appeared unlikely that either China or the United States would back down from their positions because of domestic political compulsions. Xi Jinping, as the Communist Party’s General Secretary, has managed to consolidate all reins of power in China. With the Chinese economy slowing down, he would likely be basing his legitimacy increasingly on nationalism. As such, he could not be seen to buckle under U.S. pressure in the trade war. There is also a structural shift within corporate America against China, which forms a core political constituency for Trump. This means that just the settlement of trade or tariff issues is unlikely to see an end to tensions. We are therefore likely to see a systemic escalation going forward.


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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza