A new twist to the longstanding US-China face-off over disagreements on tariffs came about in the form of a phone call between the two global leaders – US President Donald Trump and Chinese President Xi Jinping – on Thursday evening, throwing the world’s markets in a tizzy. Stocks rose on news of the call, with S&P 500 extending gains into the fourth day.
China’s Foreign Ministry broke news of the phone call, saying it was made at Trump’s behest. The White House did not respond immediately to the claim. The last conversation between Trump and Xi had taken place in January, before the US President’s inauguration.
While negotiations over contentious trade tariffs are underway between the US and China, Trump had announced on his social media Truth Social that despite “liking President Xi of China”, he is “extremely hard to make a deal with!”
China was hit hard by Trump’s surprise announcement of adding duties that mounted to a staggering 145 per cent after coming to office for his second term. It then responded by counter-measures on US goods that reached 125 per cent.
The two global giants that are intent on surpassing each other for economic dominance, seemed to have eased tensions last month as talks resumed after an agreement reached on May 12 to lower tariffs. However, no breakthrough was achieved. Trump said China was “slow-walking” negotiations, while Beijing claimed to have been “sticking to its principles”.
Trump then doubled down on tariffs and raised steel and aluminium duties from 25 per cent to 50 per cent, leading to rising tensions worldwide with US' own allies, Canada and Mexico, too threatening retaliation. The Canadian PM, Mark Carney called the new levies “illegal,” while Mexico’s Economy Minister, Marcelo Ebrard said the country would seek exemptions or consider countermeasures.
The US has accused China of going back on a promise to relax export controls on metals needed for cutting-edge electronics, and Beijing is hard-pressed by fresh US restrictions on chip-design software sale and plans to revoke visas of Chinese students.
Meanwhile, global concerns are mounting and markets remain on edge. OECD leaders who convened in Paris a few days ago warned that the trade war is taking a toll on economic growth.
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