Research Fellow talks on US-China trade tension at HSBC in Hong Kong

The event saw the participation of people from the business class and corporates, who wished to learn about the trade war, its implications on countries, the challenges and the way forward for both the countries.

Olson emphasised that there is difficulty in reconciling two fundamentally different economic system under the framework of single trade architecture.

“On one hand, we have the United States, a market-driven economy pursuing free trade policies, and, on the other hand, is China, a centrally managed economy pursuing quasi-mercantilist trade policies. All the trade disputes between the two countries are frictions between these two different systems,” said Olson.

On the 90-day deadline for a trade pact, Olson noted that a face-saving or superficial agreement should be possible within the March 1, 2019, deadline, however, a meaningful deal is not.

He said during the negotiations, the US would pursue for a strong enforcement mechanism to keep a check on the economic practices of China. They would also focus on increasing purchases for products such as soya bean, corn, among others to reduce the trade deficit between the two countries.

The two countries may be headed towards selective decoupling or bifurcated relationship. There will be some areas of cooperation, he said, but there will also be some no-go zones, too, he added.

Olson concluded that the current turmoil between the two different economic systems has reached a stage from where there is no going back.

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