Hi, this is Carl Tannenbaum, Chief Economist for Northern Trust.

There is an expression in Mandarin that translates to English as “Hearing it a hundred times is not as good as seeing it with your own eyes once.”  I couldn’t agree more.  I read reports on Asia all the time, but understanding the region requires time on the ground.

Not long ago, I made my annual trip to see clients in Malaysia, Singapore, China, and Hong Kong.  Following are some reflections on those conversations.

First, clients in the region are not so much angry about tariffs as they are confused.  They feel as if their countries are exporting goods that American consumers want, which they deliver cost-effectively.  The notion that they are taking advantage of the United States is one that they struggle to understand.

Secondly, the volatility surrounding tariff policy has frustrated exporters.  New levies are proposed, and then deferred days later.  Exceptions are belatedly granted for more essential items.  Threats escalate, and then negotiations bring things back from the brink.  Accords are typically temporary, creating a string of expiries that keep stakeholders on edge. This makes planning very, very difficult.

Third, I came away from the trip sensing that both China and the United States feel as if they have the upper hand in their trade negotiations.  But both sides may be mistaken.

American negotiators sense that a trade war would exacerbate existing weakness in the Chinese economy, a prospect that provides motivation to make a deal. But while China is dependent on exports, sales to the U.S. make up a modest fraction of the total. 

On the other side, the Chinese are betting that the increase in inflation caused by tariffs will not sit well with the American populus, creating an economic and political problem for the White House.  But so far, prices for imported products haven’t risen much.

With both sides sensing that time is on their side, a durable agreement between the two countries will take time to complete.

A handful emerging economies in Asia are highly reliant on sales to the U.S., and several of them serve as transshipment points for goods traveling between China and America.  They have a lot at stake as the terms of trade are rewritten.

The schedule for my visit didn’t allow for a lot of leisure time.  One day, I hope to see Asia at a more relaxed pace that will allow a deeper connection with the region.  Until then, I hope that the tone surrounding trade with the area will become more relaxed and that the economic connections we share will remain strong.

And that’s the view from here.