A Donald Trump tweet that upped US/China tensions and sent markets into a spin this week could be a sign that the trade war is nearing resolution, says one expert visiting New Zealand this week.
The US had started playing hardball because it "realises that things are reaching the endof the negotiation phase", said Duncan Innes-Ker, the Economist Intelligence Unit's regional director of Asia and Australia.
"It wants to bring China across the line and make sure that it gets those last concessions that they've been talking about for the last few months," said Innes-Ker, who was in Auckland for the 2019 China Business Summit.
In a weekend tweet, US President Donald Trump warned that trade talks were moving too slowly and that he would raise tariffs on Chinese goods, from 10 per cent to 25 per cent, this Friday.
Stock markets plunged in response - although they have since regained some ground on news the talks are still progressing.
One issue for countries like New Zealand was that even if the current round of talks did see a tariff truce it would not mean the end of US/China tensions - particularly around tech issues for Chinese telco Huawei, Innes-Ker said.
"The trade deal will probably address some aspects that the US has been looking to see included, notably China will be buying a lot more US products, particularly commodities like LNG and food products," he said.
But a lot of issues were likely to be left unaddressed, including subsidies.
The contentious issue of whether Chinese tech company Huawei should be allowed to build western 5G networks would still be problematic for nations like New Zealand.
"Huawei and technology issues seem to be separate from the underlying trade negotiations at the moment," Innes-Ker said. "I'm sure China hopes that it is going to come to a deal but we don't think the US will be opening up its technology markets to Chinese firms or researchers or academics."
As a result the issue was likely to dog us for many more years to come, he said.
The New Zealand Government has been under pressure from China over its decision to exclude Huawei from the core build of the 5G network upgrade.
An initial market announcement by listed telco Spark described it as a "ban", which prompted fears of a Chinese diplomatic backlash.
But efforts by the Government to dial back the response seemed to have worked and the Prime Minister's meeting with Chinese president Xi Jinping was a clear signal that the country was not out of favour, Innes-Ker said.
"From China's perspective it got the phrase, that New Zealand is not actually banning Huawei, and that seemed to be enough to get New Zealand off the naughty step," he said.
Chinese President Xi Jinping. Photo / AP
At the China Business Summit, Huawei NZ chief executive Andrew Bowater defended the company's right to be part of New Zealand's 5G mobile network build and called on GCSB Minister Andrew Little to meet with them.
Meanwhile, Innes-Ker's broad take on the Chinese economy was that government stimulus from late last year - which had lifted activity this year - would soon play through.
That meant China's GDP growth could start to slow again later this year.
"Already we're seeing people within China realise that the central bank is not taking its foot completely off the brake and that debt concerns remain a big problem for China. It's really a question of managing the slowdown rather than taking things back to the way they used to be."
Innes-Ker said he remained optimistic that there would not be a "hard-landing" for China's economy and that the Government would be able to manage expectations."
"Even with slower economic growth in China we're still seeing an enormous expansion in the size of the domestic market. For companies selling into the domestic market it is still a huge opportunity. That's a story that will go on and on for many years to come."
