The ratcheting up of trade tensions between the world’s two largest economies — and the market’s violent reaction — means the U.S. should curry favor with its other trading partners, one analyst told Yahoo Finance.
Trump’s announcement of an additional 10% tariffs on $300 billion of imported Chinese goods, has forced markets to reassess the potential for a trade deal between the U.S. and China.
Playing in the background is the president’s vehement disdain for trade deals in general — a posture that Sean King, a currency expert and senior vice president of Park Strategies, thinks Trump should reconsider.
“Instead of worrying about China we should be looking at options around China,” King told YFi PM in an interview.
King urged the U.S. to call off its commerce squabbles with Vietnam, Japan and India, and reestablish those partnerships. “Stop worrying about China, break the supply chain, stop fighting with our friends and move on,” he said.
On the third day of his presidency, Trump signed an executive order withdrawing the United States from the Trans-Pacific Partnership, a decision King vehemently disagrees with.
In light of the fight with China, “we should get back in that, like tonight,” King added.
On Wednesday, markets around the globe tumbled after a spate of international central banks cut interest rates. The synchronized moves sparked new fears about global growth and the U.S.-China trade war.
It also underscored how Wall Street has reassessed how long it will take for the bilateral trade fight to be resolved.
“We had expected a final round of tariffs targeting remaining Chinese imports at a 10% rate,” Goldman Sachs’ chief economist, Jan Hatzius, wrote in a note to this week.
That said, “news since President Trumps’ tariff announcement last Thursday indicated that U.S. and Chinese policymakers are taking a harder line and we no longer expect a trade deal before the 2020 election,” the economist added.
Park Strategies’ King told Yahoo Finance that “Knowing Trump, he changes from one day to the next, I wouldn’t be the least bit surprised if we woke up tomorrow, he got a few things from China, he says its the best trade deal ever and then he rides that to re-election.”
Still, Trump’s unpredictable nature, and China’s decision to weaken its currency modestly, has spooked the markets.
King, who calls himself a “China hawk”, acknowledges that China allowed its currency to drop, but argues it has actually been manipulating its currency upwards for a number years. Ultimately, “what China wants to do with its own money is its business and if we don’t like it we shouldn’t trade with them,” said King.
With markets so jumpy “if we can get out of a week without any new tariffs, without any new fight or some phony currency manipulation tag I think [investors] take that positive and move on. But I don’t think anybody believes anything they hear anymore,” he added.
Sarah Smith is a Segment Producer/Booker at Yahoo Finance. Follow her on Twitter @sarahasmith