US-China trade war: All stories

Domestic politics at heart of China-US trade talks

Progress is being made but the difficulties of reconciling Xi’s development goals with Trump’s “America first” policy should not be underestimated

PUBLISHED : Monday, 21 May, 2018, 6:37am
UPDATED : Monday, 21 May, 2018, 6:37am

A report that China had offered to slash its trade imbalance with the United States by US$200 billion a year lacked essential detail, such as an agreed time frame. Beijing quickly issued a reality check by dismissing it as rumour.

But it salvaged the upbeat tone by maintaining that the second round of trade talks with Washington was constructive.

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This seemed to be borne out later by a joint statement issued by the White House that the two sides had reached consensus on effective measures to substantially reduce the US deficit in goods trade with China.

This included “meaningful increases” in China’s import of energy and agricultural products from the US, which addresses a key demand by US President Donald Trump since he triggered tit-for-tat punitive tariffs that threaten to unleash a trade war.

That said, it does not dispel the threat. Fundamental problems in the relationship remain unresolved. But at least, rather than escalating tension, the outcome of the second round of talks appears to have narrowed differences and smoothed the way ahead in future talks.  

It fits a pattern of positive signals. For example, Trump met chief Chinese negotiator, Vice-Premier Liu He, a gesture not accorded by President Xi Jinping to American delegates to the first round of talks in Beijing.

The Chinese commerce ministry unexpectedly dropped a month-old punitive anti-dumping levy on US sorghum exports.

China scraps levy on US sorghum imports amid trade war talks

Officially the decision avoids increased costs for Chinese consumers, but politically it plays to Trump’s electoral heartland in the agricultural states of the Midwest, where his Republican Party will soon be defending congressional majorities in midterm elections. 

This is a reminder that the domestic politics of bilateral trade negotiations are paramount.

The same could be said of Trump’s tweet that the US Commerce Department, which employs tens of thousands of people, had been asked to help give telecommunications giant ZTE “a way back into business fast”, after the company was banned from buying components from US suppliers for seven years. “Too many jobs lost,” he tweeted. China is now waiting to see if Trump makes good the tweet.

China remains willing to import more from the US, depending on conditions. As Liu remarked after the talks, a growing middle class is willing to buy quality US and other foreign products, and China is preparing for its first import expo later this year.

Trade war averted? China vows to buy more from US, but truce will take time

 But the difficulties of reconciling Xi’s development goals with Trump’s “America first” policy should not be underestimated. 

The dropping of the sorghum tariff, and the consensus announced at the weekend, pave the way for further negotiations. Importantly for China, they do not compromise its core interests of industrial and technological development in the Made in China 2025 plan.