Trade wars and trade deals: who wins

John Royden, Head of Research at JM Finn looks at how the UK’s trade deal negotiations might be impacted by increased tensions between the US and China

trade wars

Before COVID-19 the Chinese and US were at each other’s throats; the US wanted to stop subsidising Chinese economic growth by ceasing to tolerate the expropriation of US technology by Chinese firms. The expropriation took the form of Chinese laws requiring the majority Chinese ownership of local companies and poor court processes when it was alleged that Intellectual Protocol (IP) theft had occurred. From a geo-political perspective this was all part of a greater ambition to slow Chinese progress towards the Chinese goal of matching and then exceeding the US’s global influence. Trade wars played an important part of the pressure mixture as well.

Then came COVID-19 and the suspected Chinese cover-up that followed. There is a strong argument that had the Chinese had been more open with themselves and the rest of the world at the start of the infections, they would have been able to contain the initial out-break. The cover-up worked in China because the state controls information and the media. 

In order to stop this happening again the West wants freer Chinese press and media. However, President Xi won't want to hand this over because it weakens the state’s control, but he might be forced to if there is enough COVID-19-related vilification in the international media; to which the Chinese have access. 

Xi governs China with the broad consent of the people because they like and respect him. If Xi is publically denounced for lying about COVID-19 he stands to lose much of his domestic respect and obedience.  Xi will find it difficult to govern China if the Chinese think he is dis-respected abroad.

Pressure to relax state controls of Chinese media will come from international condemnation of Xi’s COVID-19 cover up. The trade war is likely to morph into a cold war of words and accusations. The US will like this because trade wars have an element of “cutting your nose to spite your face” about them.

The impact on the UK’s attempts to do international trade deals should therefore become easier as the spats between the US and China move away from trade.  Watch the next G20 meeting with interest.

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