The trade dispute between the US and China is likely to last until at least the end of the year, a top Hong Kong analyst has predicted.
“I think the trade tensions will persist through the US [mid-term] elections,” Uwe Parpart, chief strategist of Seven Stars Cloud Group, said in an interview with CNBC.
“I think [US President] Donald Trump does not want to let off there in terms of his pressure on China because he believes that that plays well with at least a significant portion of his constituencies, and therefore new trade talks [between the two countries] won’t happen until December, until after the election.”
Interest rates were increasing in the US, which had had “very good data” and employment figures expected tomorrow [Friday in the US] were supposed to be very positive. But the Chinese economy “is actually holding up surprisingly well”, he said.
“We’ve seen some pullback on manufacturing.. but that’s been made up for with the services [sector], and that’s what China wants… strengthening of the service industries and it’s succeeding in doing so.
“I think while the trade issues are weighing on sentiment for markets, they’re not necessarily weighing on the Chinese economy in a way some people had expected. That’s a very positive takeaway.”
The danger, he said, was that tension from the trade dispute spilling into other areas. “We saw the other day a near-collision between a Chinese and a US ship in the South China Sea, and a lot of belligerent talk from people in the [US] administration or close to the administration.
“If the Chinese begin to conclude that this [tension] is not only about trade, but a sort of broader political issue and strategic military issue that’s involved, then, of course, I think we are in for a much more difficult situation than we had foreseen.
“Let’s hope that’s not the case, and it bears watching what [US Vice President] Mr Pence has to say [this week] – whether he speaks out on trade alone, or whether he is going to broaden the attack, if you will.”
Parpart is also editor of Asia Times.