Stefan Selig on US-China Trade Relations and EU Collective Action

US-China Trade War Preparedness

• 🇨🇳 China has had four years to prepare for a trade war with the US, having lived through the previous administration's policies.
• 📈 They have explored and prepared to sell to other export markets, indicating they are not solely reliant on the US market.
• 💡 The US represents about 15% of China's exports, making it an important but not exclusive market.

Urgency and Market Constraints

• 📉 Urgency for trade talks may stem from pressure on equity markets, currency markets, and bond markets.
• ⚠️ The backing off of 145% tariffs after 39 days suggests market reactions can constrain presidential behavior.
• ⏳ A potential constraint on the US administration is the midterm election cycle, with concerns about empty shelves and rising prices.

Economic Resilience and Leverage

• ⚖️ The core question is which economy, US or China, will be more resilient to the economic pain caused by tariffs.
• 🇨🇳 China may have a greater cultural, political, and media ability to withstand economic pain compared to the US.
• ⏳ The US may run out of time due to political cycles, even if their administration believes the pain will ultimately be greater for China.

EU Collective Action and Trade Complexity

• 🇪🇺 The EU faces a collective action problem in dealing with the US, similar to the complexities involved with China.
• 🐌 Negotiating with the EU, composed of 27 member states, is a long and complex process, unlike bilateral agreements.
• 🏭 Beyond trade volume, issues like non-market policies and subsidies are at the heart of the economic challenges with China.

Strategic Dialogue and Negotiation Approach

• 🗣️ Despite decades of strategic dialogue across multiple administrations, there has been limited real progress on core issues with China.
• ⚔️ The current approach of fighting on multiple fronts (Apple, Harvard, EU, Canada, Mexico) may disadvantage the US in its primary conflict with China.
• 🧠 China's President Xi Jinping, a student of history and Sun Tzu, likely advocates for picking spots and not spreading forces too thin in negotiations.