EDITORIAL: End the trade war
RECENT moves by China and the United States to mend their differences over their ongoing trade war, are likely to ease global economic tensions while putting the world economy back on a stable course.
Indeed, some have cautioned not to read too much into this latest initiative on the part of the world’s two largest economies to try to bring closure to their problems with trade. But whatever is said and promised would suggest that the two combatants are quite aware of the dangers if this situation between them continues, and would want wherever possible to nip any consequences in the bud.
International press reports have said that global markets have been rallying on the back of news that USA and Chinese officials are to meet in early October after weeks of stalled negotiations, to discuss their trade impasse.
A meeting between the two countries to discuss trade and plans to remove the tariffs, raise the possibility that some of the nervousness in markets would be eased considerably, especially once China and the USA agree to co-operate.
Once confidence returns to the stock markets, it would be the push necessary to stave off a global economic crisis.
In fact, speculation has mounted that a global recession or international economic slowdown is one of the possible outcomes of the trade war and that the world is inching closer towards that. The trade tensions have rattled financial markets and triggered a global manufacturing slowdown.
With tensions in the Middle East, the crisis in Venezuela, the ongoing dispute in the China Sea and other hotspots around the world acting up, it would do the world of good if the two countries pull back and let wiser heads prevail.
It is months since the two countries have engaged in a tit-for-tat approach to tariffs on imports from each other.
Across the Atlantic, American importers have felt the impact of the tariffs the USA has imposed on imports from China. A tariff is a tax on goods and once it is applied, it ends up making that good or item costing more to the consumer. So the next obvious result is that those American importers have no choice but to pass on the tariff on the goods to consumers, making them more expensive.
On the other hand, exporters (be they Chinese or Americans) will find that because of the tariffs, they are hard-pressed to get their products into the markets of the other country. If exports are unable to reach consumers because of the tariffs, the exporting company suffers as a result of a decline in revenue from sales.
This would have the effect of that company being forced to lay off workers, since there is insufficient earnings to pay them their wages and salaries. China would most likely feel the impact of the trade war.
The World Trade Organisation (WTO), which was set up to ensure that trade is free and fair, appears to have been a bystander in the impasse between China and the United States.
Right now the world can do without a global recession coming so soon after the 2008-2009 crisis from which several countries have not fully recovered.
So, since the trade war is having a negative impact, our wish is for the talks to come off next month, so that the spirit of compromise can return to the bargaining table.