The “second part” of the trade war between the USA and China will take place in 2025

President Biden and former President Donald Trump will be in the political spotlight this week when they take the debate stage on Thursday, June 27. Shehzad Qazi, executive director of China Beige Book International, joins Market Domination to discuss the two leaders’ policy positions on China and what to expect from U.S.-China relations in the next year.

Qazi explains that former President Trump is interested in imposing around 60% tariffs on China and ending Permanent Normal Trade Relations (PNTR). However, he explains that both presidents will try to outdo each other in the debate format, asking, “Can they actually implement their agenda when they are in office? How realistic are the trade promises they will make?”

He says that “tensions in US-China relations are increasing”: “I think that in 2025 in particular, regardless of who becomes president, we will see the second part of the trade war.” He expects the US to introduce stricter export controls and more seriously “restrict foreign investment and strategic sectors in China.”

However, Qazi believes China still offers opportunities as it remains the world’s second largest economy. “It’s about finally looking at China more intelligently… you have to follow the regulatory environment in China very, very closely. You can expect that when the economy is in trouble, the government will step in and pump a lot of money into the system to stimulate growth. It doesn’t work like that anymore. The economic model has changed. So it’s about following the economy as closely and intelligently as possible. And frankly, Wall Street is not used to that.”

Click here to watch the full episode of Market Domination for more expert insights and information on current market events.

This article was written by Melanie Riehl

Video transcript

President Biden and former President Donald Trump are in the political spotlight this week as they both prepare to take the stage for the first 2024 presidential debate on Thursday.

And while Biden and Trump have different views on their economic policy agendas, there is one common denominator: tighter trade barriers with China (read more about US-China relations here and here).

We have Shahzad China Beige Book International as Managing Director.

Good to see you.

So both sides vaguely agree on a certain degree of protectionism against China.

But the scale is quite different, isn’t it?

Because we heard that President Biden has imposed some new tariffs on China.

The story goes on

Former President Trump talked about really high tariffs.

So, what will you be looking for?

Yes, I think we know that the Trump team and President Trump in particular are talking about 60 percent tariffs on China and double-digit tariffs across the board, taking the country out of the WTO in general, ending the PNTR status with China, ending the normal permanent trade relationship, and maybe even taking the U.S. out of the WTO altogether.

Now the reality is presented in debate format.

When two opposing sides face each other, you know they will just try to outdo each other.

They will impose 25% tariffs.

How about 250 and tariffs, right?

So the question is: Can they actually achieve their goals while in office?

How realistic are the trade promises that they will make, especially to American workers, and how will they protect American farmers and so on as they lay out their agenda, so to speak, regardless of who wins in November?

What do you think the relationship between the US and China is like?

You know, in the medium term, the values ​​have increased.

There is no doubt about that.

And I think that regardless of who becomes president, we will see the impact of the trade war, especially in 2025.

What is that?

A trade war?

Second part.

How does that concrete look?

Well, I think that’s mainly about identifying additional industries on which we’re going to impose even more tariffs, imposing stricter export controls, and perhaps finally putting a bit more serious restrictions on foreign investment in China’s strategic sectors.

I think a tightening of all the different aspects of trade and relations between the US and China that we have seen will absolutely play a role.

Have the tariffs introduced achieved their goal?

Yes and no.

Today, we don’t see any Chinese electric vehicles on our roads and we don’t have any Republicans in Congress. And I’m telling you, that’s because of President Trump’s actions during his time in office.

Um, we’re not sure if it is, but there’s an example that says, “Look, we know this trade.”

For us, of course, the trade deficit has only increased as a result of the tariffs and we now know that trade is simply being diverted via the countries of Southeast Asia and Central America.

So we really don’t have that.

If the idea was to reduce the bilateral trade deficit directly, perhaps you could demonstrate this in a few years at least in a diversified form, right?

That’s it.

It absolutely is. It’s also impressive that this seems to be the only China-related issue on which Democrats and Republicans in Washington actually seem to agree.

This is the one issue where it is so important that China is no longer just a competitor.

But because of this rhetoric, China is actually an enemy.

Does that surprise you?

This is the only issue that people see and that the Capitol agrees on.

You know, this happened before President Trump took office.

It collected sperm.

Naturally.

He just accelerated it.

And yesterday in Washington, DC

I cannot move from one office as a Republican or a Democrat to another without talking about this very issue.

China as an enemy.

What is happening and what is making it difficult for the markets to follow is the strong rhetoric.

There is a lot of talk, but actions do not always fall by the wayside.

And some days and weeks it’s almost impossible to figure out how difficult that action will actually be.

In your experience, what loopholes are there in all the executive orders that have been issued?

So when money depends on following these policies, it becomes really opaque.

Another thing that interests me is the fact that, even though there is a bipartisan tone, at least when it comes to China, we also know that former President Trump is or was, let’s say, friendlier to Vladimir Putin, who is now becoming friendlier to China.

So how does it work?

How could this possibly affect the relationship?

I think a lot of it will come down to personnel, and there are already fierce internal power struggles over who really tells the president what to do, or who would tell him.

Some of it is, quite honestly, still to be determined, but at the end of the day, I don’t think many people made any money.

Trying to predict exactly what President Trump would do depends on him.

I’m thinking, how do you think American executives and CS employees listening to this should view China as an opportunity?

Is it still as big as they might have imagined 10 years ago, or is there no future?

It is an opportunity, but it will be different.

It’s getting smaller.

First of all, the world’s second largest economy will not change.

It’s about becoming smarter about China.

Finally, it can be assumed that the difficult times in the regulatory environment are over.

Now we can go back and play again.

It will be fine.

No, you have to follow the regulatory environment in China very, very closely.

It can be assumed that the government will intervene in minor economic difficulties and inject a lot of money into the system to stimulate growth.

It doesn’t work like that anymore.

The economic model has changed.

Um, so it’s about tracking the economy as closely and intelligently as possible.

And quite honestly: the street is not used to this kind of thing.

And what’s that? I guess something like: Where is China Freight now, right?

We’ve all had these kinds of surges and upswings that are more like a recovery that hasn’t happened yet but is perhaps on the horizon.

Yes, I would say that the economy had a fantastic start in the first quarter compared to before.

Um, and now as we look ahead to the summer ahead, um, you know, I think there’s probably a lot more resilience in the economy than is generally acknowledged.

I think some of the data, especially with regard to retail sales and all that, is probably going to remain mixed.

We are monitoring the real estate market very closely.

Um, and in our view, we’re likely to reach a cyclical bottom in the Chinese real estate market in the second half of this year.

More specifically, the housing.

If that were to happen, the overall economic situation in China could be much more positive than I believe.

At the moment, investors are only jumping to your base case and assessing it superficially. How does growth look this year compared to last year?

Last year they claimed they had 5.2 and they claim they will expand even more this year.

I don’t think they’ll exceed last year’s growth levels, but they’ll come close.

Therefore, I believe that the overall picture is not nearly as depressing as some would have us believe.

Not nearly as depressing.

We’ll take it, Shaad.

Thank you.

Am grateful.