Who will emerge victorious in Sino-US trade war?

At the beginning of 2017, Donald Trump, President of United States tried to contain Beijing by restrictive economic policies. At the time, he stated that US$346 billion US trade deficit was due to imbalanced trade with China. In year 2019, this deficit has reached US$419 billion, which shows well that Trump's economic policies toward Beijing are not yielding positive results.

China's stoppage of US agricultural products and imposition of reciprocal tariffs on American products indicate that this Asian economic super power does not intend to surrender to the US. In such circumstances, there will be no opportunity for President Trump and his companions to maneuver. Many US economic and policy analysts believe that in year 2020, China can hurt Trump in the re-election. It is already evident that China has become a symbol of America's economic and political failure in the world.

Lately, Bloomberg has reported that the ups and downs of asset prices on any given day are being determined, more and more, by the words and actions of three men. First, of course, is Donald Trump, who has rediscovered his power to send markets soaring—or into a tailspin—with less than 280 characters on Twitter. Then there’s U.S. Federal Reserve Chairman Jerome Powell, who repeatedly finds himself on the receiving end of nasty Trump tweets for abiding by his mandate to do what’s best for the U.S. economy, which isn’t necessarily always the same thing as what’s best for Trumph. And in Beijing, it’s Xi Jinping, the president of China who sits atop a Communist Party in which politicians and central bankers famously sing from the same hymnal, at least when the audience is outside observers.

With each of these collisions, the fragility of the global economy and markets is exposed. It seems increasingly possible that something big and important is broken. Investors who’d believed Sino-U.S. relations were stabilizing, if not improving, were caught on the wrong foot when tensions abruptly escalated. The prevailing assumption that President Trump won’t allow the trade war to continue through the 2020 presidential campaign season is being reconsidered, as the two sides appear further apart than ever. Economists at Goldman Sachs Group Inc., no longer expect a trade agreement before the election and see the Fed cutting its benchmark interest rate two more times this year in an effort to counteract the economic damage that will be done by the impasse.

A question being openly debated on Wall Street is whether lower borrowing costs will be enough to fend off a recession. There signs that economic activities in the United States are shrinking. In Europe, whose factories are caught in the crossfire between China and the US, manufacturing barometers already point toward recession. Trade war being converted into currency war—in which countries race to devalue to get a competitive edge for their exports.

Other disturbing signs are could US sell F-16 fighter jets to Taiwan? Is Washington supporting anti-Beijing protesters who’ve paralyzed Hong Kong this summer? And what could be at risk among more than a quarter of a trillion dollars of US investments in China since 1990?

All these questions are arising at a time when Wall Street’s vacation calendars are jammed and markets seem especially easy to rattle. Evidences of stock market volatility rose in August, some of the ugliest collapses in equities market over the past decade have occurred in this month.

The recent rush into safe havens sent gold to a five-year high and triggered a rally in Treasuries that pushed 10-year yields to their lowest since Trump was elected in 2016. At the same time, rates on three-month Treasury bills were higher than those on 10-year bonds—a phenomenon known as a yield-curve inversion that’s widely considered a reliable warning of an impending recession. The lower long-term yields signal that markets expect interest rates to come down in response to weak economic growth.

With each of these collisions, the fragility of the global economy and markets is exposed. It seems increasingly evident that something big and important is broken. Investors who’d believed Sino-US relations were stabilizing, if not improving, were caught on the wrong foot when tensions abruptly escalated.

The prevailing assumption that President Trump won’t allow the trade war to continue through the 2020 presidential campaign season is being reconsidered, as the two sides appear further apart than ever. Economists at Goldman Sachs Group no longer expect a trade agreement before the election and see the Fed cutting its benchmark interest rate two more times this year in an effort to counteract the economic damage that will be done by the impasse.

 According to a CNBC report, a trade war with China hasn’t tarnished his image as a champion for an unlikely group: farmers and ranchers. Farmers are one of the most visible casualties of the Sino-US trade war, which escalated sharply lately as both sides landed blows that could hold potentially devastating consequences for US agriculture, yet they appear to be sticking by Trump. More than 75% of farmers had voted for Trump in his successful campaign against Democrat Hillary Clinton in 2016. They are still sticking by him because they consider Trump a better option as compared to those running presidential race.