No trade deal? Why China should walk away and hit back at the US, in the sectors where it really hurts

While all may seem calm in markets despite the failure of the latest round of talks, a protracted trade war risks doing severe harm to the global economy

China should draw up countermeasures to hit US businesses and be ready to shift its dealings to the EU, Japan and Asean

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Despite the friendly public interactions between negotiators such as Chinese Vice Premier Liu He (left) and US Trade Representative Robert Lighthizer, there has been little sign of a settlement on trade talks, which are of massive importance to the world economy. Photo: EPA-EFE

Published: 3:00am, 13 May 2019Updated: 3:00am, 13 May 2019

An unrealistic calm surrounds the US-China trade talks after tariffs of 25 per cent were imposed on US-bound goods leaving Chinese ports from last Friday.

Stock markets in the US and China that should be in free fall over the implications of a trade conflict on this scale instead quietly rallied. US President Donald Trump would, in normal circumstances, be taking to Twitter to justify a breakdown that has potentially massive cost implications for US companies, consumers and voters. Instead, there is restraint, as the US side says talks have been “constructive”.

Liu He, China’s lead negotiator, briefed the Chinese media with beguiling smiles after a visit to Washington so formulaic that it cannot plausibly have deserved the jet-lag, assuring that talks were ongoing and that preparations were under way for a 12th round of negotiations in Beijing.

The only substantial hints on what went wrong, in a week that was intended to be devoted to victorious settlement of the year-long tariff war, came from Liu, who referred to three major differences: an argument over the timetable for removing tariffs; a demand that China’s commitments to boosting US imports should be “realistic”, and; a call for the US to respect China’s sovereignty and dignity, which means the Chinese want the agreement to give them some “face”, just as Trump wants the deal to help him win the 2020 presidential election.

“We are very clear that we cannot make concessions on matters of principle. We hope our US colleagues understand this,” Liu said. “The trade procurement figures should be realistic, the text must be balanced and expressed in a way that is acceptable to the Chinese people and does not undermine the country’s sovereignty and dignity.”

Meanwhile Gao Feng, at the Ministry of Commerce back in Beijing, tried to calm the waters: “Negotiation is a process of exchanging opinions and reaching consensus,” he said. “It is normal to have different views.”