US and China talks in Washington end in deadlock as threat of trade war rises

China and the US failed to reach an agreement on trade at the first Comprehensive Economic Dialogue in Washington on Wednesday, casting a shadow over their trade relations amid White House’s threats to impose steel and aluminium tariffs on Beijing.

Both countries cancelled their press conferences earlier in the day, providing no explanation for the moves but indicating it was unlikely any concrete results had come out of the talks. The US side cancelled its press conference first, the Chinese side followed.

The US delegation released a short statement late on Wednesday. It said: “China acknowledged our shared objective to reduce the trade deficit which both sides will work cooperatively to achieve.

“The principles of balance, fairness, and reciprocity on matters of trade will continue to guide the American position so we can give American workers and businesses an opportunity to compete on a level playing field,” the statement said. “We look to achieving the important goals set forth by President Trump this past April in Mar-a-Lago.”

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A statement issued by the Chinese delegation only said both sides would promote cooperation in the manufacturing sector, improve communication about macro economic policies, as well as cooperating in the financial sector and its supervision.

Despite the restrained wording of both sides statements, the threat of trade war still looms. On Wednesday, when asked by a reporter if he would impose tariffs on steel imports, President Donald Trump said it “could happen”.

The two sides had a day of contentious talks at the US Treasury Department to address the United States’ US$340 billion trade deficit with China, plus restrictions on access to Chinese markets.

The economic dialogue – one of four mechanisms set up by President Xi Jinping and US President Donald Trump during the leaders’ first summit in Florida in early April – is co-chaired by US Treasury Secretary Steven Mnuchin, US Commerce Secretary Wilbur Ross and Chinese Vice-Premier Wang Yang. The sides issued no statements about the results of the dialogue as the day progressed.

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At the opening session on Wednesday morning, Mnuchin said the dialogue’s purpose was to pursue a “fair and balanced economic relationship” between the US and China, addressing imbalances caused by Beijing’s interventions in the Chinese economy, and communicating to revise existing policies and regulations or to reach new ones.

Ross claimed he didn’t regard the trade deficit as “a natural product of free market forces”. “It’s time to rebalance our trade and investment relationship in a more fair, equitable and reciprocal manner,” he said.

Over the last 15 years, according to Ross, China’s exports to the US have grown 268 per cent. The trade imbalance has increased 205 per cent to US$309 billion from US$101 billion. China now accounts for nearly 50 per cent of the US goods trade deficit.

Wang said at the opening session that the two sides agreed on an approach that would be non-confrontational, mutually respectful and promote win-win results. “Dialogue cannot immediately address all differences, but confrontation will immediately damage the interests of both,” he said.

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Sending an open letter to Ross on Tuesday, a group of US steel and aluminium companies is pushing the Trump administration to take “remedial action” on national security concerns to protect the American steel and aluminium sectors from low-priced Chinese imports.

“For too long, America has tolerated China’s massive and strategic subsidising of its state-controlled industries, including steel and aluminium,” said Michael Stumo, chief executive of the Coalition for a Prosperous America, one of the letter’s signatories. “Other countries take action on national security grounds to preserve industries but the US has not, as of yet, done so.”

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It is time for the US to “assert its rights more forcefully in manufacturing and agriculture”, Stumo said. Possible tariffs on large foreign steel exporters, including China, could potentially range up to 20 per cent, according to Axios, a US news and information website.