We’re finally seeing some encouraging signs in the US-China trade war

President Donald Trump with Chinese President Xi Jinping in Hamburg, Germany, during the plenary session at last year’s G20 summit. Mikhail Svetlov/Getty Images
  • Trump administration officials held a call with their Chinese counterparts on Tuesday, formally kicking off the latest round of talks to end the US-China trade war.
  • China’s repeated commitment to buying US products and lowering auto tariffs shows that Beijing is at least superficially committed to easing the trade tensions.
  • But the arrest of Huawei CFO Meng Wanzhou and the Trump administration’s actions to confront China in other areas could cast a shadow over the talks.

Just over a week after President Donald Trump and Chinese President Xi Jinping reached a temporary truce, the two sides are showing signs of progress in talks to end their trade war.

“Very productive conversations going on with China!” Trump tweeted Tuesday. “Watch for some important announcements!”

But while encouraging signs seem to show China’s dedication to the détente, worrying signs remain that the trade war won’t end anytime soon.

“Nearly every factual data point since the G-20 has been a net-negative on the US-China conflict – except for the Tweets,” said Chris Krueger, an analyst at Cowen Washington Research Group.

Talks restart

Capitalising on the goodwill from Trump and Xi’s dinner at the G20 summit earlier this month, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin held a call with Chinese Vice Premier Liu He, the country’s top economic official, on Tuesday.

According to a statement from China’s Ministry of Commerce, the two sides discussed next steps for implementation of the agreement reached at the G20 summit. Topics included China’s promised purchases of US agricultural goods and changes to the country’s economic practices, according to reports.

The call represented the first formal discussion since Trump announced a 90-day truce that would delay an increase of US tariffs on $US200 billion worth of Chinese goods.

Trump and Xi along with members of their delegations during a dinner meeting in Buenos Aires, Argentina, at the end of this year’s G20 summit. SAUL LOEB/AFP/Getty Images

But most analysts consider it nearly impossible for the two sides to reach an agreement that includes the fundamental changes the US is seeking from China during such a short negotiating window.

“We doubt that a comprehensive agreement can emerge in the next three months, which suggests that trade tensions will resurface in earnest early next year,” Isaac Boltansky, a policy analyst at the research and trading firm Compass Point, wrote Monday.

While Trump and Larry Kudlow – the staunchest free-trade advocate on Trump’s team – suggested that window could be extended, the man in charge of the talks has shut down the suggestion. In an interview with CBS’ “Face the Nation” on Sunday, Lighthizer called the 90-day window a “hard deadline.”

“When I talked to the president of the United States, he’s not talking about going beyond March,” he said. “He’s talking about getting a deal. If there is a deal to be gotten, we want to get it in the next 90 days.”

Is China making moves?

The Chinese are also trying to show their commitment to the talks by moving forward with some of the agreed-upon steps from the Trump-Xi meeting:

  • According to reports, China is preparing to start purchases of American agricultural and energy goods in the coming weeks.
  • In addition, China’s cabinet will reportedly consider a proposal to lower tariffs on US-made autos to 15% – the rate paid on non-US car imports – from 40%.

Read more:
China is reportedly close to cutting its tariffs on US cars, a big trade-war concession to Trump

But while the Chinese have talked up the desire to move forward with these procedures, it’s unclear whether those intentions have translated into actual business for American farmers and firms. Major US farm groups have yet to see any purchases of their goods from China, and analysts say there is no data to show that Chinese purchases have resumed.

Trying to keep Huawei, bigger economic concerns separate

Complicating the talks is Canada’s arrest of Meng Wanzhou, the CFO of the Chinese tech giant Huawei, at the direction of the US. While Meng’s extradition is pending, investors and analysts were concerned that the arrest could throw the trade talks into flux.

Since the arrest, US and Chinese officials have insisted that Meng’s status will not interfere with the outcome of the talks.

“It is totally separate from anything that I work on or anything that the trade policy people in the administration work on,” Lighthizer told CBS. “So, for us, it’s unrelated, it’s criminal justice.”

Chinese state media outlets have largely directed ire for the arrest at Canada and have also separated the trade talks from Meng’s arrest.

Read more:
Chinese tech giant Huawei’s CFO proves Trump’s trade war is ‘escalating to a new level’

But casting another shadow is a reported administration-wide effort to call out China for stealing American technology and trade secrets. According to The Washington Post, multiple agencies across the US government will condemn China over such practices.

The developments follow a concerted campaign from the Trump administration to confront China over allegations of intellectual-property theft, economic espionage, forced partnerships between US and Chinese firms, and other noncompetitive policies.

But while officials are attempting to keep Meng’s arrest and the broader US campaign to confront China out of the trade talks, the separation may prove difficult.

Krueger said the US could cut a deal to stop pursuing the extradition of Meng while negotiations are productive – implicitly allowing the arrest to infiltrate the talks – or allow the current state of affairs to continue.

“The default scenario now is a multi-month (or year?) extradition process in Canada with the Huawei CFO in limbo and the Chinese very angry and increasingly pressured to respond by domestic forces,” Krueger wrote in a note to clients. “Of course in this case, it means the Huawei complaint is intimately intertwined with the politics and talks…regardless, an incredibly poor catalyst for the talks to open on.”