This Time, US-China Trade Conflict... Is the Global Stock Market a 'Time Bomb'? [Correspondent Diary]

US USTR to Announce China Trade Policy on 4th
Phase 1 Trade Agreement Non-Compliance Expected
Tariff Imposition and Market Shock Possible

Katherine Tai, U.S. Trade Representative
[Photo by Yonhap News]

[Asia Economy New York=Correspondent Baek Jong-min] The conflict between the United States and China is showing signs of spreading into the trade sector. With the global economic recovery slowing due to supply chain disruptions and rising inflation, there are concerns about market shocks if the US-China conflict escalates further.

Catherine Tai, the United States Trade Representative (USTR), will deliver a lecture at the Center for Strategic and International Studies (CSIS) on the 4th (local time).

This lecture is attracting attention because it is expected that the US will evaluate the Phase One trade agreement with China and present future response strategies.

CNBC, citing sources, reported that Representative Tai is likely to mention that China has not fulfilled its commitments to import US products as specified in the Phase One trade agreement.

Sources predict that Tai will declare a review of trade policy toward China. Since taking office, Tai has avoided specific comments on US trade policy toward China but has continued to criticize unfair trade practices by Chinese authorities using corporate subsidies.

According to the US-China trade agreement signed in January 2020, just before the COVID-19 outbreak, China promised to import an additional $200 billion (approximately 237 trillion won) worth of US goods over two years, 2020 and 2021. The US and China also planned to conclude a Phase Two trade agreement, including intellectual property rights.

There were expectations that this would resolve US-China conflicts, but due to the COVID-19 pandemic, China failed to meet the agreed import volumes with the US.

According to Chad Bown, senior fellow at the Peterson Institute for International Economics, China imported only about 60% of the promised volume last year, and if the current trend continues, it is expected to meet only about 70% of the target this year.

The Biden administration has consistently declared that it will not tolerate China’s unfair economic practices and is now expected to take action. A possible scenario is the imposition of additional tariffs.

The previous Trump administration imposed tariffs on nearly $370 billion worth of Chinese imports starting in 2018, but the Biden administration, while escalating conflicts with China, has refrained from adjusting tariffs.

Unlike in 2018, the US government now faces significant burdens in imposing tariffs. There is strong opposition from US companies, and the impact of tariffs on inflation must also be considered.

Craig Allen, president of the US-China Business Council, warned, "We need to ask ourselves whether we want excessive tariffs permanently," and cautioned that if the US continues to impose tariffs on Chinese imports, it will "permanently distort US-China relations."

The Wall Street Journal also reported that many importers are agitated about the tariff measures on Chinese imports. Importers are pressing for tariff reductions on Chinese goods.

If tariffs on Chinese imports expand amid global supply chain disruptions, there is concern that it could further stimulate inflation in the US. With US inflation soaring to 5.3%, this could trigger another flashpoint.

The US-China trade conflict could also act as a negative factor for global stock markets. In 2018, when the US and China engaged in trade conflicts, global stock markets plummeted.

This content was produced with the assistance of AI translation services.