US-China trade talks: What next?

Shoaib Ur Rehman August 1, 2019

SHANGHAI: US and Chinese negotiators have agreed to further meetings next month after brief talks in Shanghai resurrected discussions on ending the trade war between the world’s two biggest economies.

Washington and Beijing have so far hit each other with punitive tariffs covering more than $360 billion in two-way trade.

Analysts warn the two sides are still very far from resolving the impasse, which has weighed on global markets and soured relations between the two countries.

Here is a look at the dispute’s origins, the latest developments and whether an end to the row is on the horizon:

 

– What happened in Shanghai? –

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The talks in China’s financial capital were the first face-to-face negotiations since presidents Donald Trump and Xi Jinping agreed to a truce in June.

Talks had broken down in May over US charges of bad-faith negotiating by Beijing.

Expectations were already low ahead of the talks this week, which were brief but cordial — despite Trump tweeting unhelpfully from the sidelines that China lacked commitment to signing a trade deal.

The two sides described the talks as “constructive”, but aside from a vague commitment from China to buy US farm products, no major breakthroughs were announced.

They agreed to meet again in Washington in September.

 

– What caused the trade war? –

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Trump has tried to strongarm China into fundamental change on trade policies that he argues have put the US at an unfair disadvantage for decades.

Key demands include greater access to China’s markets, broad reform of a business playing field that heavily favours Chinese firms, and a loosening of heavy state control by Beijing.

But those are the very policies that abetted China’s stunning economic rise, and Beijing is seen as unlikely to surrender them.

The two sides seemed to be close to striking a bargain when talks stalled in May, and the trade war has since evolved into a clash of worldviews.

“The US and China are not just waging a trade war or a tech war,” said Larry Ong, senior analyst with risk consultancy SinoInsider.

“The coming confrontation will be over ideology, value systems, and morality.”

 

– Why has it dragged on? –

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Both leaders have strong political reasons for refusing to budge.

Xi faces a challenge in maintaining the economic growth central to his government’s legitimacy, while also implementing the tricky reform of inefficient state industries.

Trump meanwhile faces an election battle next year, and the president likes to tout strong US economic data as evidence that he is “winning” the trade war against China.

“China is very happy to slow-walk the negotiations into 2020, raising the stakes for President Trump,” said Stephen Kirchner, programme director at the United States Studies Centre at the University of Sydney.

 

– Is there an end in sight? –

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Not really. While the re-starting of talks has been broadly seen as positive, and increased agricultural trade has been welcomed by bodies including the US-China Business Council, a longer-term solution remains elusive.

The trade war is no longer just economic in nature, but one front in a broader showdown.

Kirchner said the most likely outcome would be the failure of future talks and “a world of permanently higher trade barriers between China and the US”.

But economic pressure could leave open the possibility of a deal further down the line, said Adam Ni, China researcher at Macquarie University in Sydney.

“We should expect a continuation of the trade war as just part of a broader confrontation between the US and China, until it gets to a point when the costs to both sides.. really forces them to the table,” he said.

Copyright AFP (Agence France-Press), 2019
 

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