No Resolution As US-China Trade Talks End

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After raising tariffs on US$200 billion of Chinese imports, USTR warns of new tariffs on another US$300 billion

Negotiations to end the US-China trade war came to a surprisingly early close in Washington on Friday with no resolution – reportedly just hours before the Chinese delegation were to return to Beijing.

US Treasury Secretary Steven Mnuchin told reporters at noon that the talks had been constructive as he left the US trade representative’s office, where negotiators held their latest round of talks in an attempt to end a months-long trade dispute.

US President Donald Trump later echoed that assessment via Twitter, while US Trade Representative Robert Lighthizer’s office said a further escalation is being prepared.

“The relationship between President Xi and myself remains a very strong one, and conversations into the future will continue,” Trump said. “In the meantime, the United States has imposed tariffs on China, which may or may not be removed depending on what happens with respect to future negotiations!”

Hu Xijin, editor-in-chief of Chinese state media tabloid Global Times, said the delegation from Beijing was expected to leave the US on Friday afternoon, after a total of just three hours of discussions over two days plus a working dinner on Thursday evening. Chinese politics expert Cheng Li cautioned against reading too much into the short duration of the talks, given they were only part of a prolonged process of negotiation.

More significant was the fact that the talks broke with precedent by ending without a meeting between Trump and China’s chief negotiator, Liu He, said Li, director of the John L. Thornton China Centre at the Brookings Institution.

“This time, certainly, Beijing probably expected it would be a tough meeting so they did not have high expectations early on,” he said.

After Trump’s tweets about talks continuing, Mnuchin told CNBC that there were no further negotiations planned “as of now”. But later on Friday evening, Lighthizer’s office announced that Trump “ordered us to begin the process of raising tariffs on essentially all remaining imports from China, which are valued at approximately US$300 billion”.

Speaking to select Chinese language media outlets on Thursday evening, Liu said that “under the current circumstances, increasing tariffs is not a good way of resolving problems”. Beijing has vowed to respond to the increased tariffs with countermeasures, but has not yet indicated how it will do so.

“It’s almost for sure that China will come up with countermeasures, but it will make a huge difference in terms of the nature of the countermeasure and the scope and scale,” Li said.

Whether those countermeasures were painful or symbolic would depend on the mindset of Beijing’s leadership and be “based on a lot of things that people like you and me probably do not know”, he said.

The US Chamber of Commerce said in a statement soon after the talks broke up on Friday that the group was encouraged by Trump’s optimism but “deeply concerned about recent suggestions that China is backing away from progress made to date”.

“The American business community urges the administration and the Chinese government to move forward expeditiously and in good faith to strike a high standard, comprehensive, enforceable agreement, and end the tariffs now in place,” said the chamber, which represents 3 million companies, including Ford and IBM.

“Prolonging trade tensions and the escalation of tariffs are in neither country’s interest,” it said.

During Thursday’s brief discussions, Lighthizer assured Liu that goods carried on US-bound cargo ships that had left Chinese ports before May 10 would not be subject to the increase in tariffs from 10% to 25%, according to a source close to the negotiations. That reprieve represented a window for both sides to continue working towards an agreement, Li said, particularly since Mnuchin’s remarks about the talks being constructive “left some room for the next round”.

“Any substantive agreement must also include a plan of action as progress is made to reduce and ultimately remove the tariffs that both sides have imposed,” the US-China Business Council, a member organisation for US companies with operations in China, said in a statement on Friday morning.

Trump has pushed back against rising anxiety that the prospect of a deal, having once seemed within negotiators’ grasp, was slipping away, telling reporters on Thursday that it was “possible” an agreement could be reached by the end of this week.

Yet in a salvo of early morning Tweets ahead of Friday’s talks, he said the US was in “no rush” to make a deal and repeated his willingness to continue taking in “massive payments” to the US Treasury in the form of tariffs.

Though he has claimed the bill for those taxes is footed by Chinese exporters, multiple studies have shown that it is largely US importers and – ultimately – consumers, that are burdened with the increase in costs.

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