US and Chinese officials will restart trade talks at the end of this week, but any agreement the world’s largest economies carve out is expected to be a superficial fix.
The trade war has hardened into a political and ideological battle that runs far deeper than tariffs, trade experts, executives, and officials in both countries say.
China’s Communist Party is unlikely to budge on US demands to fundamentally change the way it runs the economy, while the US won’t backtrack on labeling Chinese companies national security threats.
The conflict between the two countries could take a decade to resolve, White House economic advisor Larry Kudlow warned on Sept. 6. Yu Yongding, an influential former policy adviser to China’s central bank, told Reuters that China was in no rush to make a deal.
Presidents Donald Trump and Xi Jinping may hammer out an interim agreement in October to soothe stock markets and claim political victory after this week’s lower-level talks.
But any final agreement is “extremely unlikely to meaningfully address the Chinese structural reforms” sought by the US and other countries, said Kellie Meiman Hock, a former US Trade Representative official and managing partner with McLarty Associates, a policy and government consultancy.
Negotiators have made little discernable progress on the many points of disagreement since negotiations broke down in May, sources briefed on the talks say.
Beijing is unwilling to address the way it supports state-owned companies and subsidizes their products in coming talks, sources in China and the US say. The US continues to label Chinese tech company Huawei a national security threat, and dangle the threat of new tariffs against China.
“The ultimate result of talks must be the dropping of all tariffs,” said He Weiwen, senior fellow, Chongyang Institute for Financial Studies at Renmin University. “This is the baseline for China.” He is not optimistic about the talks’ prospects.
Since trade negotiations between the world’s largest economies collapsed in May, both countries have also broken promises and traded public insults. The mood is upbeat, but a single Trump tweet could turn that around, analysts say.
“They’re locked in this uncomfortable embrace,” said William Reinsch, a former senior Commerce Department official and Center for Strategic and International Studies fellow. “Both presidents have undercut their negotiators and neither side can rely on what the other has said,” he said.
Trump’s “tough on China” stance has swept in a new way of thinking about Beijing in Washington, despite the unpopularity of many of his other policies. The US Congress, bitterly divided along partisan lines on most issues, is united about the need for systemic reform in China.
Democrats running against Trump aren’t likely to repair the China relationship if they take the White House in 2020. In a debate on Sept. 12, presidential candidates used terms like corruption and theft to discuss China’s trade practices.
“There’s been a tectonic shift,” said Warren Maruyama, former general counsel for the US Trade Representative’s office and a partner with law firm Hogan Lovells.
“The old idea that China was in the middle of free market economic reforms that would lead them our way is effectively dead,” Maruyama said. “There’s bipartisan support for a tougher China policy.”