Donald Trump is at it again. Referring to the coronavirus as the “Chinese Virus” in a tweet and then defending the slur later, the president provoked an angry reaction from Beijing. And with his latest provocations, the dormant U.S.-China trade war may take a decisive turn for the worse.
Coronavirus had already increased those risks even before Trump began launching pointed attacks at Beijing. By causing the Chinese economy to shrink, it threatens to undermine China’s ability to satisfy its side of January’s trade agreement .
As part of that agreement, China committed to purchasing an additional $200 billion of U.S. goods by December 2021.
Even at the time, the Trump administration marketed the deal as a preliminary step towards a longer-term resolution. It didn’t entirely resolve the long-simmering conflict between the two rival superpowers.
That was apparent when the U.S. left tariffs on roughly $112 billion of Chinese goods.
But it’s more evident than ever given the recent coronavirus rhetoric coming out of Donald Trump and the White House:
Needless to say, China isn’t especially happy about Donald Trump’s choice of language. Its foreign ministry spokesperson, Geng Shuang, was quick to issue a statement rebuking him for using the term “Chinese Virus”:
Some politicians in the US associated the coronavirus with China, and smeared China. China expresses its strong anger and opposition to that.We call on the U.S. to stop finger pointing at China.
Compared to some of his colleagues, Geng’s response to Trump is understated. Because another foreign ministry spokesperson, Zhao Lijian, recently repeated the conspiracy theory that the coronavirus is a bioweapon created by the U.S. military.
Such exchanges risk causing a breakdown in U.S.-Chinese diplomacy. And at a time when China may struggle to fulfill its half of January’s agreement, such diplomacy will be sorely missed in the coming months.
Donald Trump’s indelicacy is one thing, but the coronavirus has already exerted a severe impact on the Chinese economy.
In January and February, Chinese industrial production fell by 13.5% , compared to the same period last year. Retail sales dropped by 20.5%, fixed asset investment declined by 24.5%, and private sector investment fell by 26.4%.
Economists predict a contraction for China in Q1 2020. And if the coronavirus situation worsens, the economic pain will continue.
If it does, it will be hard to see how China could purchase $200 billion more of American goods before the end of December 2021.
“There is now no chance of China fulfilling its import targets within the timeframe set by the text of the agreement,” said TS Lombard economist Rory Green, speaking to Channel News Asia.
The January trade agreement does refer to an “unforeseeable event” creating possible exemptions from its terms. But only if both parties agree.
Given that Donald Trump and his administration have been busy smearing China in recent weeks , they’ve reduced the chances of such consultation being constructive.
Because of this, both sides risk throwing the U.S.-China trade war into a more dangerous phase. With the coronavirus likely to affect both nations badly, they may also be more inclined to take protectionist trade stances in the coming months (although things have already taken a turn for the protectionist ).
Which means: expect Donald Trump’s rhetoric and the U.S.-China trade war to get worse rather than better.