US Pres. Trump can’t force China to yield on trade like Mexico – Global Times

Anil Panchal FXStreet

China’s Global Times repeated its habit of firing warning shots at the United States (US) President Donald Trump during its piece on early Thursday morning in Asia. The story says that it is impossible that the US can strike a trade deal with China by forcing Beijing to make big compromises, as the US did to Mexico when it came to the US-Mexico-Canada Agreement (USMCA).

Key quotes

Mexico's economy is highly dependent on the US. Some statistics showed about 80 percent of Mexico's exports went to the US in 2018. This may show why the US can force Mexico to make compromises in trade talks.

The same scenario won't play out in the trade talks between Beijing and Washington

China's exports to the US account for 19 percent of its total exports of goods, far below the 80 percent recorded by Mexico.

More importantly, China has a huge domestic market that can help offset the negative effects of the trade war as some Chinese exporters lose market share in the US. It's very unlikely for Beijing to make compromises in trade talks with the US in the way that Mexico did.

FX implications

While markets are catching a breath during the early Asian session post-Federal Reserve (Fed) decision, no major reaction to the news could be witnessed. Though, the piece shows China’s strong dislike for the US and increases the odds of no phase-one, leading to the US tariffs on China and another trade war. The USD/JPY trades on the back foot around 108.55 by the press time.

Author

Anil Panchal

FXStreet

Anil Panchal has nearly 15 years of experience in tracking financial markets. With a keen interest in macroeconomics, Anil aptly tracks global news/updates and stays well-informed about the global financial moves and their implications.

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