US-China trade flare-up a short-term scare as both sides seek off-ramp: analysts

Analysts said a mutual de-escalation is expected in the short term between the US and China, a development that would provide some relief for global markets after last week’s barrage of economic sanctions, export controls and vows of triple-digit tariffs threatened to send the world’s two largest economies into another devastating escalatory cycle.

On Sunday, US President Donald Trump adopted a softer tone compared to previous comments on the tensions with Beijing, telling reporters, “I think we’re going to be fine with China,” and he had “a great relationship” with his Chinese counterpart, Xi Jinping.

Trump’s more conciliatory remarks came two days after threatening a 100 per cent tariff increase on Chinese goods and export controls on all “critical software” starting November 1 in a social media post.

The US president also wrote that there was “no reason” for a high-stakes summit with Xi to be held as planned on the sidelines of the Asia-Pacific Economic Cooperation (Apec) forum in South Korea at the end of the month, though he later told reporters that he had not cancelled the meeting.

He issued the warning after Beijing announced a sweeping expansion of its export control regime, particularly in relation to rare earth elements – raw materials that are crucial components in the production of multiple hi-tech goods.

The US-China relationship is “in a mode now where they seem to be focused on extinguishing the latest brush fires that have flared up, rather than having the deep and substantive discussions that are required on the underlying structural challenges and the need for a new modus vivendi,” said Stephen Olson, a visiting senior fellow at the Singapore-based ISEAS-Yusof Ishak Institute.

South China Morning Post