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Nikkei Editorial

US and China only build tension with tit-for-tat tariffs

Trade war will not end without compromise from both sides

U.S. President Donald Trump and Chinese President Xi Jinping shake hands at a meeting in Osaka on June 29. The two countries remain deeply divided on trade.   © Reuters

U.S. President Donald Trump and Chinese President Xi Jinping continue to impose steep tariffs in a seemingly unending series of tit-for-tat measures. If the trade war between the two economic superpowers escalates any further, the entire global economy could suffer a critical blow in addition to the U.S. and China.

Washington on Sept. 1 enacted a 15% additional tariff on $110 billion worth of Chinese products, including electronics and clothing, as part of a larger $300 billion round announced by Trump. Further penalties will take hold in October and December unless China compromises in their trade talks.

China responded by imposing retaliatory tariffs on crude oil, soybeans and more on the same day, and threatened to take further action in December. All told, the country will be slapping a 5% to 10% additional tariff on $75 billion worth of imports from the U.S.

The two sides are now close to having additional tariffs on virtually all shipments coming from the other country. It is too dangerous to leave this situation alone.

The U.S.-China trade war, which kicked into full gear in July 2018, has had an undeniable impact on their economies. China's real economic growth rate hit its lowest since 1992 in the April-June quarter, while short-term interest rates overtook long rates in the U.S., which many consider a sign of a coming recession.

Fears of an economic slowdown have spread to Europe and Asia as well, leading to uncertainty in securities and financial markets worldwide. Such fears will not disappear unless their root cause, the trade war, comes to an end.

The U.S. and China must prioritize economic and market stability above all else, and make every effort to end their feud. They need to resume cabinet-level trade talks as quickly as possible and agree on how to end their trade war.

The countries came close to an agreement in April. But negotiations fell apart in May, largely because China changed its tune. Beijing has since hunkered down for a protracted fight. This shift reflects how domestic politics have a significant impact on their positions in the talks.

It is understandable that the U.S. takes issue with China's subsidies for state-owned companies and its intervention in the currency market. No negotiations can take place if Beijing refuses to compromise in fields that it deems central to Communist Party rule.

The U.S. should also refrain from hard-line moves that unnecessarily drive China into a corner. The better option is for America to work with Japan and Europe to push for reform in China through dialogue.

Trump is mistaken to look to monetary and fiscal stimulus for relief even as he continues the trade war with China. Retracting the tariffs is more important than anything else.

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