The conflicting signals about the progress being made by the US and Chinese negotiators have left businesses across the globe in a state of perplexity, uncertain as to what to do in an increasingly duplicitous situation.
US President, Donald Trump, at the back end of last week, said he had not agreed to roll back any tariffs, just a day after Chinese officials said the two sides had agreed to do so on both countries’ goods, as part of the first phase of a trade deal.
Even with the conflicting signals, momentum seems to be in the direction of a stop-gap deal. EU leaders hope that any such agreement will keep the trade war from worsening.
Since early 2018, Mr Trump has imposed tariffs on $360bn worth of Chinese goods. In October, he cancelled a plan to increase tariffs to 30%, which was scheduled to take effect on October 15, as part of phase one of a deal.
Across the period, global economic growth has ground to a halt, holding back the best efforts of Mario Draghi, the just-exited president of the ECB, who warned that slowing global growth and Brexit uncertainty pose a risk to growth in the eurozone economy, against a backdrop of concerns that Germany remains on the brink of recession.
However, in his latest statement, Mr Trump made no mention of the planned increase in tariffs on a further $200bn worth of Chinese goods, scheduled to take effect on December 15.
This gives an encouraging indicator that a deal may yet be struck before the end of the month.
Economic reports, meanwhile, indicate that the US-China trade war has already severely damaged the global economy.
The International Monetary Fund (IMF) has warned that Europe and the EU must prepare emergency plans to cope with a looming economic slump, stating that the eurozone’s economy has weakened significantly and urging EU leaders to prepare for a financial crisis.
Most worrying for Ireland’s exporters was the IMF’s regional economic report, projecting that Europe’s growth would decline by over 50%, from 2.3%, in 2018, to 1 %, in 2019.
The knock-on effects for Ireland’s export industry, and the economy as a whole, could be severe. Currently, half of all agri-food exports and pharmaceutical output, as well as of other manufactured goods, is sold into Europe.
Most worrying is the plight of the two largest markets for Irish goods: the Brexit-hit UK and the recession-hit Germany.
The quandary many Irish businesses face is that the stellar growth in exports, so far this year, does not stack up against the dire global economic reports.
The pickle is most obvious for traders with Germany, who have seen their exports dramatically grow, from €6.9bn last year to €8.9bn in the first eight months of 2019.
Also, despite all the dire warnings of over-reliance on the UK market by Ireland’s state promotional agencies, exports to Britain have not suffered over the three years since the Brexit referendum.
Adding further fuel to the dilemma, Ireland’s exporters appear to be major winners from the diversionary effects of the Sino-US trade war: exports to the US have risen from €25bn, last year, to €30bn, in the first eight months of 2019, and exports to China have grown by a staggering 73%, to €5.7bn, in the same period.
The uncomfortable truth, and answer to the dilemma, has been presented in the OECD 2019 report for the Irish government on SME entrepreneurship policy in Ireland, which points to ten of our largest exporters accounting for over two-thirds of total exports.
These companies, primarily US-owned, have emerged as masters in managing shifting global consumer trends and side-stepping the global trade wars.
On the other hand, the OECD says that the vast array of Irish companies are small or medium enterprises (SMEs) and are not very active in international markets.
“SME export levels are very low by international standards, with only about 6% of Irish SMEs directly trading across borders,” it said.
Hence, in spite of the solid, overall export growth in these turbulent times, it is based on a few major players, who may be able to weather the storm.
This may not be the case for the vast array of Irish companies, whom the OECD advises must lift productivity, increase exports, and increase their scale–up rate to be larger players on international markets.
John Whelan is managing partner of international trade consultancy, The Linkage-Partnership