Crucial week for the US-China trade war

Washington have accused Beijing of reneging on substantial commitments made during months of negotiations

Chinese Vice Premier Liu He gestures as US Treasury Secretary Steven Mnuchin (C) chats withUS Trade Representative Robert Lighthizer, 1 May 2019.

Chinese Vice Premier Liu He will travel to Washington for two days of trade talks this week, China said on Tuesday, setting up a last-ditch bid for a deal that would avoid a sharp increase in tariffs on Chinese goods ordered by US President Donald Trump. US officials have accused China of reneging in the past week on substantial commitments made during months of negotiations aimed at ending their trade war, prompting Trump to issue a new deadline to raise tariffs on $200 billion worth of Chinese goods to 25% from 10%.

The higher tariffs are scheduled to take effect at 0401 GMT on Friday, a spokesman for the US Trade Representative’s office said. That comes right in the middle of Liu’s visit. China’s Commerce Ministry said that Liu, who leads the talks for Beijing, will spend only two days in Washington - Thursday and Friday - instead of the three days he had previously planned before Trump announced the tariff increase.

US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Monday cast doubt on the talks, telling reporters China had backtracked on previous commitments. The gloomier tone shook Wall Street, causing major stock indexes to tumble more than 1%. Treasury yields and oil prices also fell as the potential for an unraveling of the trade talks sparked fresh concerns about global economic growth.

During a 10-month US-China war, US tariffs have been imposed on $250 billion worth of Chinese goods, and retaliatory Chinese tariffs slapped on $110 billion worth of American products. Trump has pushed for sweeping changes to China’s policies on intellectual property theft, technology transfers industrial subsidies and market access.

Trump has criticized the US trade deficit with China, which hit a record $419 billion in 2018, as stealing American manufacturing jobs. His hard line on China has played well with his political base in Midwestern industrial and farm states, with Trump seeking re-election next year.

Trump had initially set the tariff increase to 25% on $200 billion worth of Chinese goods, including internet modems and routers, printed circuit boards, vacuum cleaners and furniture, in January. He delayed the deadline until 1 March to allow negotiations, and then postponed the increase indefinitely, citing progress in the talks.

A person with knowledge of the talks told Reuters that Chinese negotiators sought to reverse earlier agreements to make changes to Chinese laws to reflect policy changes on a “comprehensive” range of issues. It would be difficult to overcome this setback and reach agreement on other sticking points, such as subsidies and cloud-computing access, in just two days of talks, the person said. US Experts speak of lack of trust between the negotiating teams, which can be hard to rebuild.

China’s response to the prospect of new tariffs has been reserved. Foreign Ministry spokesman Geng Shuang said in a press briefing on Tuesday that mutual respect was the basis for reaching a trade agreement.

“Adding tariffs can’t resolve any problem,” Geng said. “Talks are by their nature a process of discussion. It’s normal for both sides to have differences. China won’t shun problems and is sincere about continuing talks,” Geng said.

China will keep calm against threats of higher tariffs from the United States and has “complete confidence” in its ability to face challenges in trade talks, a commentary in the Communist Party’s People’s Daily, China’s top newspaper said on Wednesday.

 

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