Tuesday, 21 August 2018 14:20

China, US "Not Optimistic" Trade Negotiations Will Succeed: FT

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Commenting on the upcoming, fourth round of trade talks between the US and China, which are scheduled to take place in Washington tomorrow ahead of the Aug.23 implementation of new China tariffs by the US, the FT reports that "neither side is optimistic that the meeting in Washington, between teams led by Wang Shouwen and David Malpass, can succeed where three earlier rounds failed."

There has been a resurgence in market optimism that the ongoing trade war between the two nations may be resolved after the WSJ reported last week that a November summit between Trump and Xi seeks to find a common ground on trade, sending global risk sharply higher in the past 3 days.

And yet, it was only in May that China’s Vice-Premier, Liu He, and Steven Mnuchin, US Treasury Secretary, said publicly after meeting in May that neither side would resort to tariffs while negotiations continued. But just days later Donald Trump announced his intention to proceed with punitive tariffs on Chinese industrial exports worth $50bn annually.

Meanwhile, in private conversations, the FT reports that Beijing officials said that "what they see as Mr Trump’s constant provocations — such as his recent threat to target additional Chinese exports worth $200bn with tariffs of up to 25 per cent— have made it extremely difficult for them to offer conciliatory gestures."

China is also exasperated by the Trump administration’s "good-cop, bad-cop" approach to the negotiations personified by Mr Mnuchin and Robert Lighthizer, US Trade Representative; China's exasperation stems from the fact that while Mnuchin and other Treasury officials have indicated a willingness to negotiate a speedy end to the dispute, Trump has repeatedly sided with the China hawks at the Office of the US Trade Representative.

"We are not optimistic because we don’t think Trump is willing to compromise," one Chinese official told the Financial Times, noting that this week’s talks may - at best - lead to other, higher-level negotiations before Mr Trump decides to up the ante again.

The FT also notes that if Trump follows through on his threat to target an additional $200bn worth of Chinese exports, "it will harden views in Beijing that a full-scale trade war between the world’s two largest economies is inevitable."

That said, it is not very likely that Trump will concede, especially not since "Trump is weaponizing the US economy,” as Richard Yetsenga, research head at ANZ Bank in Sydney claims. "Because the US economy is so strong, he is banking on other countries to fold."

As for tomorrow's meeting, talks will center on a list of more than 140 specific demands originally drafted by the Trump administration for the first round of trade talks in May.

These included items such as the rapid approval of applications by Mastercard and Visa to enter China’s domestic payments market — and JPMorgan’s plans to take a majority stake in its Chinese...

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