China could find it more difficult than other Asian economies to reach a deal with the US over tariffs, Morgan Stanley analysts said in a report that outlined possible avenues for progress.
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The team of analysts, led by the Wall Street investment bank’s chief Asia economist, Chetan Ahya, said that while there were many challenges to overcome, actions aimed at remedying the United States’ sizeable bilateral trade deficit could yield positive results.
“The multitude of issues between the US and China will mean that reaching a deal may be challenging and certainly more challenging on a relative basis as compared to other Asian economies,” they warned in the report, which was released on Wednesday.
China could consider multiple responses in about six weeks, the analysts said, including renegotiation of the trade deal clinched during Donald Trump’s first term as US president, steps to regulate e-commerce exports, the potential sale of the TikTok social media platform, and the establishment of a joint fentanyl task force.
The world’s two largest economies, engaged in a trade war since 2018, reached a phase-one trade deal in early 2020. However, China only fulfilled about 59 per cent of its purchase commitments in that deal, the report said. The US is examining the fulfilment of the phase-one deal and is expected to deliver a report by April 1.
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The analysts said China faces challenges in increasing imports from the US, as limited product categories are available for immediate export, with sectors where the US could expand exports – including energy – facing supply constraints over the next two to three years.