Two days of talks between a Chinese delegation and US officials in Washington came to a fruitless end last week, resulting in both the US and China enacting a fresh round of tariffs on each other to the tune of $32 billion combined ($16 billion each).
While expectations of progress in the talks was low, the market was quietly hopeful of a positive outcome which could pave the way for proper negotiations between the US and China, in a similar way to the talks we saw between the US and the EU, which could help bring about a dismantling of the tariffs applied so far.
No Further Talks Scheduled
According to a source who spoke with US news agencies but asked not to be named, the talks ended without any hope and no further talks have been scheduled with Chinese officials apparently suggesting that no further talks could happen until after the mid-term US elections in November.
At the meeting, the US negotiators highlighted the instances of US companies under threat from Chinese practices while China, in turn, argued that it was satisfying its WTO obligations. One source is quoted by Reuters as saying that the US response to China’s claim that it was in line with WTO regulations was that of “We’re not going to care about the WTO as you fuel overcapacity, wreck industries and steal IP (intellectual property). We’re not going to sit on our hands.”
The US Demands Better Market Access
The US is demanding that Beijing improves market access for US companies, improves intellectual protections for US companies, reduces industrial subsidies and reduces the $375billion trade surplus over the US. The US team brought up the example of Micron Technology, which was given a temporary ban by a Chinese court in July this year for selling its main semiconductors in China. The company was found by the court to be violating patents held by United Microelectronics Corp in China.
China, on the other hand, argued over the lack of market access for Chinese items such as Chinese cooked chicken (one of the exports that were agreed in 2017 as part of the 100-day plan).
“Constructive” And “Candid” Talks
The meetings concluded on Thursday and Chinese officials left without either a joint or individual statement from the delegations involved though, on Friday, the Chinese Ministry of Commerce released a statement saying that the two sides had a “constructive” and “candid” talks over trade issues.
While the $16 billion worth of tariffs applied by each side isn’t a significant amount, the market is fearful over the US’s announcement that it is drawing up plans to launch a further $200 billion worth of tariffs on Chinese goods.
Washington Discusses $200 Billion Tariffs
As mid-level officials from the two economic superpowers were meeting to discuss the potential for negotiations, US officials were holding a separate meeting to discuss the details of the $200 billion tariffs which could come into effect by late September / early October which is expected to provoke a response by China. However, China doesn’t import enough US goods to be able to apply a similar tariff so the US administration’s current thinking seems to be that if it keeps upping the ante, China will back down.
The upcoming US mid-term elections are clearly fuelling the relentless US approach at the moment with Trump’s stance on China proving popular in the latest polling s it could be that we see a dialing down of tensions once this is out of the way.
World Trade Down This Year
Continued trade tensions are taking a clear toll on the global environment with the latest data showing that world trade growth fell -0.8% in June and is showing an average monthly growth of -0.1% over the year so far. In other words, global trade has contracted this year as the US’s protectionist trade policies have hit global sentiment.