Former Ambassador Lavin Says U.S., China Unlikely to Reach Trade Deal This Year

Former U.S. Ambassador to Singapore Frank Lavin said Monday that the latest escalation in tensions between Washington and Beijing significantly reduced the likelihood of reaching a trade deal between the two sides later this year.

Trade talks between the U.S. and China had restarted and seemed to be progressing well before President Donald Trump again increased tariffs on $200 billion of Chinese goods back in May, shocking markets and causing negotiations to fall apart.

They restarted only last week, but the President has yet again floated the idea of imposing 10 percent tariffs on $300 billion of Chinese goods, effective from September 1, CNBC reports.

Lavin, who served as the country’s ambassador to Singapore from 2001 to 2005, called the move “a step away from a solution,” suggesting that a U.S.-China trade deal was highly “unlikely” any time soon.

“This tariffs war has gone on for over a year, so you see a deterioration in environment, a deterioration in trust and communication,” Lavin, who is the CEO of business consultancy Export Now, a company that helps consumer brands expand in China, told CNBC.

Since the beginning of the trade war between the world’s two greatest economies, the U.S. has slapped China with 25% tariffs on $250 billion of imports from the country and Beijing has retaliated by imposing increased tariffs on billions of dollars of American products that it buys.

However, some analysts suggest that Trump is seeking to reach a trade agreement with China so as to ensure his own re-election in 2020. They believe that the President’s odds of winning a second term in office largely depend on the strength of the U.S. economy, which risks being hurt by continuing trade disputes with China.

“Recessions and rising unemployment have historically killed the re-election of sitting presidents (Hoover, Ford, Carter and Bush senior) and for this reason we remain of the view that a deal will ultimately be reached,” said Shane Oliver, head of investment strategy and chief economist at Australian investor AMP Capital, in a report.

Oliver further said that due to President Trump’s rhetoric, China may want to wait until after next years election to strike a trade deal with the U.S. to avoid appearing like it is on the losing end.

“When he is publicly triumphant, when he publicly is chastising, publicly finger pointing, he’s not giving them space,” said Oliver.

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