Exclusive: The lastest on China-US trade friction

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Europe

02:24

The latest round of the US and Chinese tariffs went into effect this week, but is either side winning the trade war? Nick Lardy, a senior fellow at the Peterson Institute for International economics, sat down with CGTN's journalist Wang Guan to talk about this issue.

Lardy said that using changes in stock markets as a justification for policies is a serious mistake. The stock market has declined periodically in China and stock prices are primarily driven by perceptions on the part of retailers and investors of what's happening to liquidity, not by underlined economic activity.

When asked about whether the Chinese economy is slowing down and therefore if the US is more likely to win this "game of chicken," Lardy noted that's a fundamental misunderstanding of the dynamics of the Chinese economy.

"The indicators that are sometimes pointing to weakening retail sales, but overall consumption demand remains quite strong in China. And retail sales data does not include expenditures on education, health, travel recreation and so forth," he said.

"I don't think we're seeing much reliable evidence yet that the Chinese economy is slowing, and I think it's a big strategic mistake on the part of the US to assume that China is going to capitulate because its economy is very weak. It's one of the strongest growing economies in the world."

In the white paper, the Chinese government called the US sanctions "trade bullying," a pretty strong wording that people haven't heard from Beijing for a while.

Regarding this, Lardy commented that the United States is still the world's biggest economy, and restricting access to markets does impose costs on other countries. And the "bullying" has several dimensions including extraterritorial applications of US law that many countries find objectionable, not just China.

President Trump still has the legal authority to continue to impose the kinds of tariffs and restrictions he has put in place against China. Even if he suffers a significant defeat in the midterms, he will not take them off, but he will when these tariffs end up imposing very high costs on US consumers and businesses, according to Lardy.

Lardy pointed out at last that Trump said countries around the world should honor their sovereignty, but the United States does not respect the sovereignty of other countries in a lot of cases.