SY’s Pentikäinen says trade war is not over

Mikael Pentikäinen, CEO of Suomen Yrittäjät, the Finnish SME association, believes that China and the United States must thaw their trading relations at some point.

The most recent turn in the trade war begun by US President Donald Trump was seen late in the evening, Finnish time, on 9 Apr., when Trump announced a surprise 90-day moratorium on most of the tariffs he was imposing. That means that only the tariffs on China and the previously announced 10% “baseline tariff” will remain in force for now.

Suomen Yrittäjät CEO Mikael Pentikäinen commented on Trump’s surprise move in a recent blog post. Pentikäinen says it was caused by fear induced by the strong market reaction.

“The yield on US government bonds started to rise, more bonds entered the market, and the emission of US government debt was poorly received. The markets forced him to back down and showed that there is at least one force which Trump must be wary of and respect. This is not a bad thing,” Pentikäinen writes.

Even though almost all countries received additional time to negotiate the tariffs, Trump continues his sabre-rattling with China. The final outcome of this conflict is still completely open. China has said that it does not intend to give into Trump.

“China is an important trade partner for the US: 15% of Chinese exports go to the US. That means that China is where products that are important for many Americans are made. Tariffs raise the prices of those products. China is also an important financier of the US. However, trade is not balanced, which is what Trump is trying to fix. China’s share of US exports is under five per cent,” Pentikäinen writes in his blog.

Thaw ahead

Pentikäinen believes that because of the dependent relationships between the US and China, it is clear that the two countries must thaw their trading relations at some point.

“If that does not happen, the crisis will escalate – and become truly bloody, if it leads to the annexation of Taiwan, for example,” he writes.

Based on current information, the ‘truce’ in the trade war will last 90 days. Pentikäinen says that during this time Trump will expect world leaders to, as the president says, “kiss his ass” to secure deals.

“Hopefully, kissing Trump’s behind will generate solutions which calm and stabilize the situation, at least between the EU and US, but also more widely.”

Pentikäinen encourages Finnish companies and their owners to keep track of the situation with a cool head, while preparing for the worst, however.

“They should think and be prepared for a range of scenarios – including for the trade war continuing after the moratorium. At the same time, it’s worth remembering that Trump may – at least if the markets apply enough pressure – back down at the last minute and change course, a course he says is based on his instincts.”

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