- US and Chinese officials are kicking off two days of negotiations Thursday to try to reach a preliminary deal to end the trade war.
- The two sides remain far apart on the US’s demands for fundamental changes to the Chinese economic model.
- Beijing has been reluctant to make major changes to its control economy, such as ending subsidies for state-owned companies.
- Details of the next meeting between the two countries’ leaders, Donald Trump and Xi Jinping, are still up in the air.
High-level officials from the US and China officially kicked off two days of meetings on Thursday with a critical trade-war deadline creeping ever closer.
US Trade Representative Robert Lighthizer is the point person for the team of officials from the Trump administration that also includes Treasury Secretary Steven Mnuchin. On the other side of the table is the Chinese group led by Vice Premier Liu He, the country’s top economic official.
The two sides will try to work out the framework of a trade deal that will lower tariffs, ease trade tensions between the two countries, and allay the worries of business owners on both sides of the Pacific.
Time is of the essence since March 1 marks the scheduled end of the 90-day pause in the trade war. After that date, US tariffs on $US200 billion worth of Chinese goods are scheduled to increase to 25% from 10%, a potentially devastating jump.
But with time running low, the possibility of a comprehensive deal seems remote, especially given that the two countries’ leaders – Donald Trump and Xi Jinping – will need to approve any final agreement.
But with no meeting scheduled between Trump and Xi and a dwindling amount of time left before the escalation, many experts are starting to predict that the deadline may not be so hard after all.
Significant distance to bridge
Entering the second round of talks, the two countries are still struggling to find common ground on key issues.
The Trump administration has continued to push for China to make fundamental changes to its economy and make it easier for foreign firms – including American companies – to operate in China. For many in the Trump delegation, including Lighthizer, those are a prerequisite to any deal.
But China has only expressed a willingness to agree to a more limited set of changes while maintaining the core of its communist economic model. Beijing has also offered some smaller sweeteners to Trump, such as large-scale purchases of key American goods.
Even if a deal is struck, bridging the disagreements, the US is reportedly pushing for tough measures to make sure any agreement is enforced.
According to The New York Times, the Trump administration is pushing for a clause that would allow the US to quickly reimpose tariffs on Chinese goods if exports from the country continue to rise after a deal is struck.
Given the distance to go between the two sides, many experts doubt that a broad, enforceable deal can be reached in such a short amount of time.
“As the Trump administration’s March 1 deadline for a trade deal with China approaches, with another Xi-Trump summit to follow, it seems almost impossible that a comprehensive agreement will be reached in time,” Brad Setser, a senior fellow at the Council on Foreign Relations, wrote for the news website Axios.
Trump-Xi meeting is up in the air
Further complicating the negotiations is the fact that the two sides seem to agree that a face-to-face meeting between Xi and Trump is necessary before an agreement can be finalised.
According to reports, Xi is expected to drop by the latest talks at some point, and Trump similarly met with Liu when the vice premier came to Washington, DC, at the end of January.
But no one is quite sure when exactly Trump and Xi will meet.
Axios reported Sunday that Trump advisers floated the idea that Xi could come to the US and visit Trump’s Mar-A-Lago club sometime in the middle of March. By contrast, the South China Morning Post reported Monday that the Trump-Xi meeting could take place on the Chinese island of Hainan during the last week of March.
How hard is the March 1 deadline?
So given the work left to be done and the lack of a meeting between Trump and Xi, what about the March 1 deadline?
Any increase of the tariffs on $US200 billion of Chinese goods would be a problem for many US businesses, and economists estimate that a major escalation of the trade war with China would cause serious problems for the US economy.
But even with those risks, Trump officials have tried to make the deadline seem firm to gain leverage over the Chinese, who are already facing a faltering economy. Kevin Hassett, the chairman of the White House Council of Economic Advisers, told the Fox Business Network on Monday that March 1 was “a real deadline.”
But despite the Trump administration’s attempts to keep the pressure on for the negotiations, most experts agree that it is unlikely the two sides will allow the escalation to occur while talks are ongoing.
“While reiterating the March deadline is useful as motivation, we doubt that the US is seriously considering adding tariffs as long as negotiations are making progress,” Steve Englander, the head of North American macro strategy at Standard Chartered Bank, wrote in a note to clients.
Similarly, Setser wrote that the two sides might come to a short-term bridge deal while negotiations continued.
“The likely outcome is a punt that defers tariff increases in exchange for ongoing Chinese purchases of US soy and energy,” Setser said.
Indeed, Trump himself suggested Tuesday that the March 1 deadline might be fungible.
“If we’re close to a deal where we think we can make a real deal, I could see myself letting them slide for a little while,” the president told reporters.
Business Insider Emails & Alerts
Site highlights each day to your inbox.