Trump's trade talks with China could decide the fate of the trade war and the US economy's future

xi jinping trump tariff meeting 2x1

  • US and Chinese officials are meeting in Washington, DC, on
    Wednesday to continue trade talks with the goal of ending the
    trade war
    .
  • The two sides have until March 1 to reach a trade deal — or
    the US is scheduled to increase tariffs on $200 billion worth of
    Chinese goods.
  • The two sides both have a lot of pressure to reach an
    agreement, but remain far apart on some major issues.
  • Complicating the talks is the US’s extradition request of
    Huawei CFO Meng Wanzhou.

As the deadline to reach a deal rapidly approaches, officials
from the Trump administration and Chinese government are set to
meet in Washington on Wednesday to try and end the US-China trade
war.

The Trump team, led by
US Trade Representative Robert Lighthizer
, will sit down with a
Chinese delegation led by Vice Premier Liu He, the country’s top
economic official.

The two sides are facing down a March 1 deadline to find an
agreement that would put a permanent pause on the escalation of a
trade war that has seen tariffs slapped on $360 billion worth of
goods going between the two nations.

But with a large agenda of economic issues to discuss and a
growing number of non-economic complications, the US and Chinese
teams will have to thread a small needle to get a deal done.

Pressure on both sides to make a deal

FILE PHOTO: U.S. Trade Representative Robert Lighthizer speaks at a news conference in Washington, United States, Aug. 16, 2017. REUTERS/Aaron P. Bernstein/File Photo

The talks between Lighthizer and Liu are the second high-level
meeting between the two countries since President Donald Trump and
Chinese President Xi Jinping hashed out a temporary truce at the
G20 summit in December.

As part of the agreement, both sides agreed to not escalate the
trade fight for 90 days, setting up the March 1 deadline. After
that date
the US is scheduled to increase
its
10% tariffs on $200 billion worth of Chinese goods
to 25%, and

Trump has threatened to hit
the remaining $255 billion of
Chinese imports with tariffs, too.

Such an increase would likely cause major
ripple effects in the US economy
. Close to half of economists

The Wall Street Journal surveyed
in December cited the ongoing
trade war as
the biggest threat to the US economy
.

Read more:
A simple chart shows the winners and losers from Trump’s trade war
with China

With the prospect of a major escalation just 30 days away, both
the US and China have a lot of reasons to get a deal done.

For Beijing, the trade war is weighing on
an already slowing economy
. Internal factors such as
high indebtedness
are putting major strains on the Chinese
economy, and the
tariffs are not helping
the situation.

The Trump administration is also
facing economic concerns
, and
distaste for the trade war
among key political groups puts the
president in a tough spot.

“Republicans in Congress aren’t going to find additional
tariffs really a winner back home, and they are already facing
concern in large parts of the country over the impact of the
partial government shutdown,” Mary Lovely, an economics professor
at Syracuse University,
told the Wall Street Journal
on Wednesday. “More tariffs and
failure to get a deal will ultimately seem to people like further
failure of the government.”

A long way to go

President Donald Trump sits between Boeing Chairman and CEO Dennis Muilenburg (R) and Treasury Secretary Steve Mnuchin (L) during a round table at Boeing in St. Louis, Missouri, U.S. March 14, 2018.

But despite the pressure on the two countries to get a deal
done, major differences still remain.

On one side, the US is likely to insist that China make
significant changes to the way the country does business, like
eliminating subsidies for favored companies and cracking down on
the theft of US intellectual property.

On the other side, the team from Beijing is expected to offer
merely superficial changes to its economic system, but commit to
purchasing large amounts of US goods to help lower the US-China
trade imbalance.

There are some encouraging signs that the Chinese government is
already taking some of the reforms that the US requested seriously.
On Wednesday,
Beijing moved up the timetable
for a new law that would
strengthen intellectual property protections and, in theory,
increase market access for non-Chinese companies.

While the move is part of a broader internal reform plan,
whether China is truly committed to its promises is a key sticking
point in the trade negotiations.

Also adding to the difficulties is the
lack of cohesion on the Trump team
. Lighthizer has generally
been more hawkish toward China, while pro-free trade members of the
administration — most notably Treasury Secretary Steven Mnuchin
— have advocated for a short-term deal to lift the tariffs.

These opposing ideas have previously complicated talks, and
Susan Aaronson, a senior fellow at Centre for International
Governance Innovation (CIGI), warned they could do so again.

“The Trump Administration still lacks any clear objectives,
strategy or metrics for success in its trade talks with China,”
Aaronson said in a statement. “Without such a plan, they are
sending confusing messages to Chinese bureaucrats and mocking what
trade is about: mutual benefit.”

The Huawei problem

Meng Wanzhou

Complicating matters further is the ongoing argument over the

US’s charges against Chinese tech giant Huawei
.

On Tuesday, the
US officially submitted an extradition request
for Huawei CFO
Meng Wanzhou around two months after
the executive was arrested
in Canada for alleged violations of
American sanctions on Iran and fraud. The request came the day
after the US also charged Huawei with
the theft of trade secrets
.

Beijing immediately condemned the move.

“We call on the US side to immediately withdraw the arrest
warrant for Meng Wanzhou as well as the official extradition
request,” China’s Foreign Ministry spokesman Geng Shuang
told reporters Tuesday
.

While both sides have insisted that Meng’s arrest does not have
to do with the trade talks, the move appears to be part of
a broader strategy by the Trump administration
to combat
China’s growing influence in everything from economics to
technology to international security.


Trump linked the two issues in December
, suggesting that he
could “intervene” in Meng’s case if doing so would help seal a
trade deal.

Trump is expected to attend a dinner with Liu Wednesday
night.

SEE ALSO: One
chart shows just how badly US companies are getting whacked by
Trump’s trade war


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Source: FS – All – Economy – News
Trump's trade talks with China could decide the fate of the trade war and the US economy's future