US-China trade could see ‘two more years of serious tension,’ says economist

FAN Editor

A new offensive in the U.S.-China trade war appeared to loom on the horizon on Friday.

U.S. President Donald Trump’s administration was thought to be ready to place tariffs on an additional $200 billion worth of Chinese goods after the public comment period on those measures ended at 12:00 a.m. ET on Friday. Beijing has indicated any such move would be quickly followed by its own retaliation.

As those tensions threaten to spill over into more areas of commerce, some economists are predicting that the conflict between the world’s two largest economies could last well beyond the U.S. midterm elections in November.

“I think we could see two more years of serious tension in the U.S.-China trade relationship,” said Derek Scissors, Asia economist at the American Enterprise Institute, a conservative public policy think-tank based in Washington.

“What the U.S. wants is … very serious changes in Chinese trade behavior and maybe domestic economic behavior,” he added.

Speaking with CNBC’s Dan Murphy on Friday, Scissors said he was unsure if there was an “off ramp” for the recent tension in U.S.-China trade relations.

Echoing that sentiment, Stephen Roach, an economist and senior fellow at Yale University, said a “significant escalation” in the U.S.-China trade conflict will occur, even though it remains to be seen whether Trump “goes the full $200 billion, or not, initially.”

“The president is cornered right now politically and his MO (modus operandi) when he’s cornered is to do something larger on another front to deflect the tension,” Roach added to CNBC’s “Squawk Box” on Friday morning.

Beyond America’s ongoing trade fight with China, Trump also suggested to a Wall Street Journal columnist on Thursday that Japan could be next in his sights.

“The president likes to pick trade fights,” Scissors said.

According to Roach, however, tariffs are unlikely to be the solution to the trade deficits between the U.S. and its trading partners.

“The tariff war is really a foil,” Roach told CNBC, saying that the U.S. had bilateral deficits with 102 countries around the world.

Instead, he called it a “multilateral problem” that’s due in a large part to Americans not saving.

“When you don’t save and you want to grow, you import surplus savings from abroad, you run massive current account and trade deficits to attract the capital,” Roach said, claiming that was something that “any basic macroeconomics class will teach its students.”

“Apparently the president or his advisors, several of them unfortunately went to Yale, don’t either remember or didn’t do well in their macroeconomics classes,” Roach added, further suggesting that Trump and his aides should “go back … and study their notes.”

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