Trump says trade talks are ‘going really well’. US and China officials ask: ‘What talks?’

Diplomatic sources say no high-level discussions to defuse the growing trade war have taken place since June

PUBLISHED : Thursday, 26 July, 2018, 2:58am
UPDATED : Thursday, 26 July, 2018, 9:58pm

US President Donald Trump accused China of “being vicious” by targeting American farmers on Wednesday morning amid escalating trade tensions, but insisted that negotiations with Beijing were “going really well” – despite recent public statements by his top advisers that talks had broken down.

In postings on Twitter, Trump indicated that he’s still looking for a deal with China, but that Beijing’s retaliatory moves in response to Washington’s decision to impose tariffs on US$34 billion of Chinese imports will make it more difficult.

How moderates were shut out of Trump’s inner US-China trade circle

“China is targeting our farmers, who they know I love & respect, as a way of getting me to continue allowing them to take advantage of the U.S. They are being vicious in what will be their failed attempt. We were being nice – until now!,” he wrote.

“When you have people snipping at your heels during a negotiation, it will only take longer to make a deal, and the deal will never be as good as it could have been with unity. Negotiations are going really well, be cool. The end result will be worth it!”

His remarks effectively contradicted what Treasury Secretary Steven Mnuchin said during a House Financial Services Committee hearing on July 12: that negotiations with Beijing had “broken down”.

According to Chinese diplomatic sources and China experts in the United States, high-level talks and dialogue between Beijing and Washington have been put on hold since US Secretary of Commerce Wilbur Ross made a visit to Beijing in early June.

Ross’s visit followed a Washington trip in May by Chinese Vice-Premier Liu He, who is President Xi Jinping’s top economic adviser.

The US-China trade war just got hotter with cold cash farm subsidies

The trips apparently failed to bring about a ceasefire with China over soaring trade frictions amid growing animosity, which have boiled into a trade war between the world’s two largest economies.

Trump's Wednesday tweets came the day after his administration announced that it would roll out a three-part, US$12 billion plan to subsidise American farmers caught in the trade war – a move China analysts warned signalled an escalation in the dispute.

Trump did not elaborate in his tweets about what negotiations he was referring to. Diplomatic sources said that while official exchanges between the two countries have been greatly reduced since the trade dispute flared in the past months, it was likely that communications might still be continuing at lower levels.

Chinese diplomats in the US, though, were caught off guard by Trump’s latest remarks.

“We have no idea what he is talking about and you may have to direct the question to him,” a representative of at the Chinese embassy in Washington said.

The three ways China will respond to America’s next tariffs

Chinese diplomats and many diplomatic observers in the US also expressed frustration about the suspension of top-level communications, which have played an important role to steady US-China relations. They said they believed that there are few signs talks among senior officials could be resumed soon.

“Both sides are now just waiting for the other side to respond,” said one Chinese diplomatic source, who requested anonymity.

Trump and Xi met several times last year and spoke over the phone many times. But they have yet to meet this year and despite their pledge to cooperate on sensitive bilateral and regional issues, including North Korea, they have not had telephone conversations since Trump’s Singapore meeting with North Korean leader Kim Jong-un in June.

Another Chinese diplomatic source also confirmed that the high-level annual talks that Trump and Xi agreed to in their first meeting last year in Florida have been put on hold for the time being. The talks were to focus on economic, security, diplomatic and cultural relations issues.

Meanwhile, the first diplomatic source said, US-China diplomacy is progressing only on the sub-national level, between US state governors and their Chinese counterparts and potential investors.

It could take years to fix China trade war damage, US businesses warn Trump

For example, Arkansas Governor Asa Hutchinson, a member of Trump’s Republican Party, plans to dispatch his economic development director, Mike Preston, to China before the end of this year. The trip would be Preston’s second to the country, aimed at securing investment commitments.

In 2017, Chinese companies invested $38 million in Arkansas, mostly in industrial machinery and equipment manufacturing, according to Rhodium Group, a consultancy that tracks investment flows between China and the US.

“It’s important that we look for a solution very quickly so that we don’t have an increase in tariffs and escalate the tariff war, as some would describe it,” Hutchinson was quoted as saying last week while at the National Governors Association meeting in New Mexico.

Trump’s assurances that negotiations with Beijing are “going really well” come as the US Trade Representative’s office ploughs ahead with procedures to enact a second round of punitive tariffs on Chinese imports worth US$16 billion.

Calculating the costs to China’s economy if the trade war escalates

On Tuesday, a panel in Washington heard from US business lobbyists regarding the proposed 25 per cent import duties, which could be enacted as early as next week after the comment period ends on July 31.

At the hearing, trade industry representatives urged the USTR to reconsider what one witness called the “blunt instrument of tariffs”, citing rising costs for US customers and small businesses, as well as the prospect of harmful, retaliatory measures from China.

A further hearing is expected to take place in late August on a newly proposed 10 per cent tariff on Chinese imports worth US$200 billion.

Richard Bush, a China expert at the Brookings Institution in Washington, said Beijing was apparently frustrated that a series of trade talks with the Trump administration had yielded few concrete results, largely due to Trump’s unpredictability and the lack of coherent policy and strategy concerning China and trade issues generally.

David Lampton, director of China studies at Johns Hopkins University’s School of Advanced International Studies, also said it was imperative for both sides to have direct talks and dialogue over their differences, especially when bilateral ties were at its worst downward spiral in decades.

“I think it’s a catastrophe that we don’t talk to each other. Of course, it’s not no communication but it’s greatly reduced,” he said.

“But if we talk, both sides need results at some point. If each side cannot produce any results, some people would say ‘Why talk?’” Lampton added.

Additional reporting by Robert Delaney, Zhenhua Lu and Owen Churchill