The escalating tensions between the U.S. and China have taken center stage this week after President Donald Trump announced plans to increase tariffs on $200 billion worth of Chinese goods to 25% from 10%, effective 12:01 a.m. ET Friday.
“We’ve been adversaries for decades,” Jonathan Wachtel, global affairs analyst and former communications director for UN Ambassador Nikki Haley, told Yahoo Finance’s On the Move, referring to the tensions between the U.S. and China that date back years before the current trade war. He pointed to China siding with Russia over Syria and Venezuela.
“We’ve had geopolitical issues underneath boiling and at times, actually explosive. These negotiations are important of course, and we do want a trade deal, but we have underlying problems that still need to be resolved,” Wachtel said.
The latest standoff between the two world powers sent stocks into a tailspin, with the S&P 500 ending lower Thursday for the worst four-day slide since December.
Beijing’s top negotiator, Liu He, is in the U.S. for yet another round of talks, but both sides have indicated they are prepared to dig in if things go south. Speaking Thursday at the White House, Trump said he got a “beautiful’ letter from Chinese President Xi Jin Ping, but he went on to say, “we’re not going to be taken advantage of anymore.”
“We have to negotiate with the Chinese,” said Wachtel. “We’re the two largest economies. We need to find some sort of workable way forward,”
No matter where things stand after this round of talks, the tensions between the U.S. and China will likely impact the global economy for quite some time.
“China is so invested in us with their debt that there’s a balancing act that has continued for a number of years. We can go back to that place. In this case it’s almost as if you have to break it to fix it,” Wachtel said, adding that we are in a trade imbalance and something has to change. “How long it takes for things to get repaired is really a big question. How much tolerance there is, how much does the world get affected by this financially? Very perilous times financially.”