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Will Renewed Talks Ease U.S-China Trade War Tensions?

After slapping levies on each other’s products for months without talking, U.S. and China are finally ready to ease things down—maybe. On Thursday, the Chinese vice minister said representatives will travel to the U.S. to discuss trade issues on August 22 and 23. This meeting would be the first since May regarding the tariff dispute.

Since May, the two countries have incessantly proposed tariffs on each other. At first, it was a tit-for-tat method. In response to U.S. threats to China that it will impose penalties on $200 billion worth of Chinese goods, China said it would impose tariffs on $60 billion of U.S. goods.

Regarding the most recent threat, the Commerce Ministry of China took an accusatory tone on the U.S.’s intentions, saying the tariffs seek to hinder China’s “peaceful development” rather than to narrow the gap between the imports of two countries.

This makes sense, as these trade concerns have hit China’s currency and markets much stronger than they have hit the U.S. market, which seems to be as strong as ever with solid GDP growth and a tight labor market.

While China is questioning America’s intentions, the U.S. is accusing China of manipulating the yuan to be lower so that it will be less affected by U.S. tariffs and its goods for exporting will become cheaper and thus, more popular.

China’s central bank, the People’s Bank of China—or PBOC—announces the daily exchange rate fixes of the yuan against other currencies within a certain range. The yuan has slid to a record level since April, and it has fallen nearly 10% against dollar.

Because of this “tactic,” President Donald Trump ordered the proposed tariffs of $200 billion of Chinese goods to be raised as high as 25% from 10% to offset the depreciated Chinese currency.

However, a point to consider is that opinions regarding the matter within the U.S. officials aren’t quite in unison. In fact, the truce made by the U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He in late May haven’t been put into action as Mr. Trump decided to continue proposing tariffs.

Additionally, some more aggressive trade advisers of the U.S. believe that it is an opportunity for the nation, since its economy is much more robust than that of China. So, in their opinion, Beijing will be more willing to concede since it has more to lose. Naturally, this gives the U.S. more power in this fight, especially considering how Trump has set up plans to compensate farmers who are suffering damages due to the trade dispute.

At this point, it seems as if different analysts and advisers have different views on this trade war. Some seem to think that it is losing its true meaning of controlling the trade imbalance between the two nations and is becoming more accusatory—as the two countries are bickering right now.

Others believe that unless China brings some valuable offer to the table, such as buying similar amounts of U.S. goods as the amount of tariffs Trump is imposing, it will be difficult to end this battle.

Whether or not the upcoming talk will become a milestone episode in this long series of trade battles is uncertain. However, since it still delivers some possibility of easing the tensions, the markets responded positively.

The Dow Jones Industrial Average rose 1.6%, the S&P 500 added 0.8%, and the Nasdaq Composite gained 0.4% after the news. Some main companies that were afflicted by this dispute benefited as well. Caterpillar CAT jumped 3.2%, Century Aluminum CENX gained 9.1%, while Boeing advanced 4.3% BA.

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