THE agreement between the US and China in Switzerland, providing a temporary de-
escalation of trade conflict between the two countries has produced an upturn in global share markets and a measure of relief to businesses and the millions of workers on both sides of the Pacific who have borne the brunt of the economic pain of President Donald Trump’s tariff war.

Announcing the agreement, China’s representative called it an “important step” to resolve differences between China and the US.

He also stressed that it aligned with the interests of both nations and global economic stability.

Vice Premier He Lifeng, leader of the Chinese delegation further described the discussions as “candid, in-depth and constructive”.

On the American side, US Treasury Secretary Scott Bessent and trade representative Jamieson Greer emphasised that “substantial progress” had been made.

Bessent described the discussions as “productive and constructive” while Greer noted: “It’s important to understand how quickly we were able to come to an agreement, which reflects that perhaps the differences were not so large as far as may be thought”.

Both delegations highlighted the establishment of a longer process of
“trade consultation” and expressed the optimistic hope that this could open the door to a broader agreement.

Trade and geopolitical rivalry

This preliminary consensus should not detract or distract from the fact that both sides are aware that trade is not merely an economic tool.

In Asia especially, it is a fundamental pillar of geopolitical strategy underpinning alliances, projecting influence and shaping the regional balance of power.

The US treasury secretary recently stated that the US does not want “generalised decoupling” from China but only strategic breaks.

He also remarked that “we could do a big, beautiful rebalancing” of economic ties with China. In his view, the “dream scenario” would be one in which the US and China work together to unlock access to Chinese consumers while China buys more American-made products.

These comments likely reflect his team’s concern for achieving a more balanced trade relationship between the US and China.

However, Bessent and Greer will undoubtedly be pushed to ensure the US uses it as a key lever to maintain its dominant position in global politics and economics.

The US and Chinese negotiating teams may need a reminder that a broad-based trade agreement – if guided by the right decisions – can yield positive outcomes, not just for both nations but also for global peace and stability.

The following is a listing of some of the positive impacts:

Geopolitical impact

Trade disputes have become a major source of larger and even systemic friction between the US and China, impacting their overall relationship.

A comprehensive agreement that addresses trade and other economic concerns of discriminatory or unfair policies can reduce these tensions.

As seen recently, even a temporary agreement leading to tariff reductions has been welcomed and has calmed global markets and politics.

The US and China trade and economic disputes have undermined the authority and effectiveness of multilateral trade institutions such as the World Trade Organisation (WTO).

An agreement could potentially revitalise the WTO by reinforcing multilateral dispute resolution.

This could also lead to a renewed commitment to a fairer and more effective rules-based international order that both countries claim to support.

The negotiation and implementation of a trade agreement necessitates sustained dialogue and cooperation. This initial meeting has already built a degree of confidence and trust. It should help open more channels for communication on other critical geopolitical issues to foster a stable and predictable international environment.

Economic impact

A comprehensive agreement would likely involve significant tariff reductions and the resolution of key trade disputes. This could lessen the risk of greater fragmentation of the global trade system. The lowering of tariffs can help to restore confidence, encourage investment and boost global economic activity.

While some decoupling of supply chains has occurred, a major trade deal could lead to stabilisation of supply chains and reverse some of the inflationary pressures and disruptions caused by the trade war. This will benefit consumers and businesses in the two countries and worldwide.

A comprehensive agreement will boost global trade and investment, leading to higher growth rates worldwide.

The recent temporary tariff reduction has been cited as a factor that can improve the odds of avoiding a recession in the US. It should also help China in dealing with the slowdown affecting its economic growth.

Global governance impact

Cooperation between the two countries is crucial for addressing global challenges such as climate change, pandemics and nuclear proliferation.

A broader trade agreement could foster a more conducive environment for cooperation, including joint research, technology transfer and the implementation of sectoral agreements.

The agreement could influence the development of international standards and norms in areas such as artificial intelligence, space exploration and even weaponry and military technology proliferation.

Given the size and influence of both economies, any alignment or divergence in these areas could have global repercussions.

Technological impact

The agreement could address issues related to technology transfer, intellectual property rights and competition in emerging technologies. This can positively reshape the dynamics of technological competition between the two nations and have implications for global innovation.

Transnational issues such as cybersecurity and nuclear proliferation require a degree of cooperation among major global powers. Reduced tensions from a trade agreement could make it easier for the US and China to find common ground and work together on these challenges, thus benefitting the rest of the world.

In conclusion, a broader trade agreement between the US and China has the potential to be a significant positive force and game-changer in geopolitics by reducing tensions, strengthening the global political
and economic order, fostering cooperation on global challenges and providing more stability for the rest of the world.

The optimistic scenario also sees it as helping prevent a further descent into a “new Cold War” where other countries are compelled to choose sides. This would allow for the emergence of more stable, flexible and pragmatic international relations.

However, the specific effects of such an agreement are still uncertain. Whether it ends up as a positive in improving geopolitics will also depend on its effective implementation and enforcement by both sides.

It is also evident that even with a broad agreement, new trade, economic and geopolitical controversies could arise in the future, requiring ongoing dialogue, adjustments and pragmatic leadership to overcome.

Hopefully, the final trade agreement can provide a model for resetting geopolitical rivalries to improve the prospect for global peace and security.

Lim Teck Ghee’s Another Take is aimed at demystifying social orthodoxy.

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