'China and the US cannot give up on each other'

Interview: Şenol Çarık

While US President Donald Trump increased tariffs on China to 125 percent, he announced that additional tariffs were suspended for 90 days for more than 75 countries that contacted them and did not retaliate. China also made a counter-move after the US increased tax tariffs to record levels. China responded by raising the customs duty it applies to certain US-origin products to the 125 percent level.

Dokuz Eylül University Faculty of Business, Department of International Trade and Business Chair Prof. Dr. Berna Kırkulak Uludağ evaluated the developments for Şenol Çarık at 12punto. Uludağ said, "The US and China are incredibly interdependent economies. The ruin or disappearance of one would not really benefit the other. An escalated trade war will lead to losses for both sides."

Prof. Dr. Uludağ's assessments are as follows:

'THE FIRST MAJOR IMPACT IS INFLATION'

There is no winner in this. If both the US and the country responding to it, China, are involved, both will lose.
The first major impact for the US will be inflation. There is currently no serious production. We see that production has shifted to Mexico, China, and the Far East. There is an economy based on imports. You are running a current account deficit; you are purchasing raw materials, products, and services. When you suddenly increase customs barriers and impose taxes, the imported products entering the US become expensive. This is a situation that triggers inflation. The costs of goods and services will increase.

'THE MOST FEARED SCENARIO FOR THE US ECONOMY'

We see the same situation in the Chinese economy. Along with inflationary pressure, we will see that firms in China, which is the world's factory, will have difficulty selling goods and services. This is not felt much right now because there is state intervention. There is also the reflection of this on financial markets. Stock markets are losing a lot of value. We see that the decline in the Chinese stock market, the German stock market, and especially the American stock market is approaching 11 percent. This means that asset prices are becoming cheaper. It means that companies' stocks are losing value and company valuations are becoming cheaper. This is the most feared scenario for the US economy. Because the US economy is not an economy based on money markets or banks like Turkey, Germany, or Japan. The US economy is an economy based on companies and where the stock market is strong. The biggest danger in the US stems from the stock market and the loss of share value of companies.

'CHINA AND THE US CANNOT GIVE UP ON EACH OTHER'

This trade war is not the first, but this time it is in an expanded form...
China and the US cannot give up on each other. Because they have to learn to live together. The existence or rise of one depends on the existence of the other. The US-China relationship is like this, but the Europe-China relationship is not! The US and China are incredibly interdependent economies. The ruin or disappearance of one would not really benefit the other.
For the US economy to grow, it needs cheap Chinese products. China similarly needs the US economy.

'AN ESCALATED TRADE WAR WILL LEAD TO LOSSES FOR BOTH SIDES'

When we look at US borrowing today, the number one country holding the largest debt assets (government bonds and bills) is Japan, and the second is China. We see that between 2023 and 2024, China began selling the American bonds and bills it held.
An escalated trade war will lead to losses for both sides. A common-sense, more logical, patient, and conciliatory attitude is essential not only for the US and China but also for world peace.

News Source : 12punto