The US is headed for a much more aggressive trade war with China regardless of who is president next year, economist says

The US is headed for a much more aggressive trade war with China regardless of who is president next year, economist says
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  • A more intense trade war between the US and China is unavoidable, China Beige Book’s Shehzad Qazi said.
  • Janet Yellen’s warning on China’s overcapacity won’t cause the country to change its industrial policies. 
  • China would have many ways to sidestep heightened US restrictions in the event of a new trade war, Shehzad Qazi. 

A fiercer trade war between the US and China is inevitable, no matter who wins the presidential election in November, a top China expert said. 

“Our view is we’re headed toward another trade war, regardless of who’s president next year. They’re going to absolutely have to take this issue head on,” Shehzad Qazi, COO of China Beige Book, said on CNBC’s “Squawk Box” on Thursday, adding that some members of Congress have already been pushing aggressive proposals.

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Despite Treasury Secretary Janet Yellen’s visit to China hinting at a thaw in relations between the two economic giants, Qazi believes that Washington won’t soften its stance in order to loosen economic tensions with Beijing.

“I think we’re headed for a new round of tariffs and something far more aggressive even maybe than we got during the Trump years,” he said. 

Yellen had a tough talk with China during her visit on their industrial overcapacity flooding global markets with cheap products, potentially jeopardizing American businesses, But Qazi dismissed the idea that Yellen’s warnings would make China change its behavior. 

“First of all, the Communist Party itself is very interested in reengineering the economy, transitioning the economy, so that it’s more consumer-led. That’s not impacting their industrial policy, which is what the Secretary was concerned about,” he said. 

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On top of that, even though there have been dire warnings about China’s manufacturing collapse and its impact on the economy, Qazi pointed out that Chinese factories are still churning out products, slashing prices, and shipping goods overseas. This ensures the country’s manufacturing momentum and the policies to support their ambitions, especially in the electric vehicle sector.

Even in the face of a more aggressive trade war with the US, China has ways to skirt any restrictions, the COO said .

“[A] lot of members of Congress would tell you that we need to make sure that we’re putting tariffs on any Chinese cars being produced in Mexico. We need to get rid of the so-called Mexico loophole and so forth,” he said, adding that the European market has many doors through which China can export its cars. 

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The world’s second-largest economy started off 2024 with a slight rebound after stumbling out of the pandemic. Still, Fitch Ratings this week slashed its outlook from “stable” to “negative,” warning that Beijing may accumulate more debt while shifting from property-driven growth to a more sustainable model. The country is also the only major economy that is dealing with deflation as consumer demand struggles in the wake of the nation’s property crisis. 

Read the original article on Business Insider

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