China-US trade talks hit dead end but ‘there’s still room to move’

China and the United States have hit a dead end in trade talks, with dialogue between the world’s two biggest economies cut since Washington ramped up threats.

Former Chinese officials and observers said the suspension of talks – revealed by the Chinese Ministry of Commerce late on Friday – reflected China’s frustration with its “difficult” negotiating position and its desire for Washington to scale down its expectations of compromise from Beijing.

Some observers also said that if Washington did go ahead with threatened tariffs on an additional US$100 billion in Chinese goods, Beijing might go one step further and target US companies in China.

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US officials had said that both sides were trying to resolve the dispute but Commerce Ministry spokesman Gao Feng rejected suggestions that there were any talks, adding that such discussions had not taken place “for a period of time”. 

He ruled out the possibility of “any kind of negotiations under current circumstances”, taking a tougher line than Beijing’s earlier position that it was always willing to engage in talks to resolve the issue.

Gao also said China had drafted “detailed countermeasures” to hit back at the US and no options would be excluded.

The last publicly reported trade talks between US and Chinese officials were on March 24, when Vice-Premier Liu He told US Treasury Secretary Steven Mnuchin in a phone call that China would defend its interests. That conversation followed Liu’s trip to Washington, where he was given the cold shoulder.

White House economic adviser Larry Kudlow said on late Friday that there were “back-channel discussions” with China and Trump might give China a list of suggestions “as to what we would like to have come out of this”. He gave no details of the discussions.

Chinese analysts said China still saw dialogue as the way forward, but the US was demanding too much and unfairly penalising China by exempting several countries from the tariffs.

“The US has always set China’s concession as the goal for negotiations. But this is not negotiation,” former commerce vice-minister Wei Jianguo said. “It is condescending and domineering.”

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Wei said the possibility of a trade war spilling over into a financial war or affecting US companies operating in China could not be ruled out.

“China has too many points of attack to choose from,” he said, saying semiconductor firm Qualcomm and machinery giant Caterpillar could be subject to tighter national security and environmental reviews.

But some Chinese analysts were not impressed with the ministry’s rhetoric. 

“I don’t agree with saying that no negotiations can be staged under the current circumstances,” Renmin University international relations professor Shi Yinhong said.

“We should vow strong retaliation but we should still express our willingness to sit down at the negotiation table, to leave leeway for reconciliation. If both sides continue behaving like this, then an all-out trade war will loom.”

Tariffs on an initial US$50 billion in Chinese goods are not expected to come into effect until June, after a public comment period. And China has not announced the effective date of its retaliatory measures proposed on Wednesday, leaving room for negotiation. 

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Shi said that if Chinese and US officials did not communicate before that deadline “it will be a historic diplomatic failure”.

Pang Zhongying, distinguished professor of global studies at Ocean University of China, said there was little trust between China and the US.

“China is not clear whether the US really wants negotiations,” Pang said. “China is fully aware that the situation is grave and escalating. It has repeatedly expressed its intention for dialogue, but to no avail.”

Wei said Gao’s comments did not suggest that China refused to engage in future talks.

“The current atmosphere is not for negotiations but the gate to future negotiations has not been shut. We still welcome talks but it has to be done in a good atmosphere, where both sides are equal and with sincerity to solve the issue,” he said.

Huo Jianguo, senior research fellow at the Centre for China and Globalisation and former director of a research institute under the ministry, said the US should not expect too big a compromise from China.

“There must be time for both sides to sit down for a talk before June,” he said.

Additional reporting by Associated Press