Trade Talks With China Open in Washington, as Obstacles Abound


Top officials from the United States and China began two days of face-to-face trade talks on Wednesday, trying to break an impasse that has left the world’s two largest economies in a damaging trade war.

Despite the high stakes of the discussions, there was little optimism that a major breakthrough was imminent.

Trump administration officials have signaled that the negotiations are narrowing around a smaller initial deal that would stave off additional tariffs, but not roll back the duties on $250 billion worth of Chinese imports that Mr. Trump has already imposed. In exchange, China would follow through with promised purchases of American goods and services and some modest economic changes.

A person familiar with the negotiations said that there were signs of progress on the first day of talks but that it did not appear that major breakthroughs were imminent on many of the big concessions that the United States was seeking.

The negotiations, which are taking place in the Eisenhower Executive Office Building, are being led by Robert Lighthizer, the United States trade representative, and Liu He, China’s vice premier. President Trump plans to meet with Mr. Liu at the conclusion of the talks on Thursday. The meeting will offer an indication on the status of the negotiations, and analysts will be studying the president’s body language if the encounter takes place.

The delegation from China was welcomed to Washington by angry Chinese protesters who rushed its motorcade. After arriving at the White House complex, the two sides exchanged pleasantries and joked about the seating arrangements.

The countries are facing a deadline of March 2 to reach a trade agreement — or the United States has threatened to raise tariffs on $200 billion of Chinese imports. But there is little chance that every issue will be resolved by that date, and Trump administration officials describe the negotiations as exponentially more complicated than anything the White House has tackled to date.

The talks come just days after the Justice Department unveiled sweeping charges against Huawei, the Chinese telecommunications giant, and its chief financial officer, Meng Wanzhou. Huawei and Ms. Meng are accused of stealing trade secrets, obstructing a criminal investigation and evading United States sanctions on Iran.

The timing has raised questions about whether the Trump administration unveiled the charges to ratchet up pressure on China before the talks. Ms. Meng was arrested in Canada last month, on the same night that Mr. Trump and President Xi Jinping of China dined together at the Group of 20 summit meeting in Buenos Aires where they agreed to a trade truce.

Treasury Secretary Steven Mnuchin, who met with Mr. Liu on Wednesday, said a day earlier that the Huawei case was being handled on a separate track from the trade talks. But given China’s heated reaction to the arrest and indictment, it is hard to imagine that Chinese officials will not raise the issue.

“I think it’s very difficult to keep them separate,” said Weijian Shan, a private equity investor based in Hong Kong and the author of “Out of the Gobi,” a memoir that depicts China’s modern history. “To the extent that China feels that this is a major issue with America, they will bring it up.”

For now, both sides appear eager to find areas of agreement, including on purchases of more American goods. China has demonstrated a willingness to address Mr. Trump’s concerns about the United States’ bilateral trade deficit with big purchases of goods and services, like chicken, soybeans and tractors. That is the easy part. More difficult is persuading China to overhaul its economic policies.

The Trump administration has been pushing China to scale back subsidies of state-owned enterprises, sharply open its markets to foreign investment and end its longstanding practice of forcing American companies to hand over trade secrets as a condition of doing business there. China has made a series of moves in the last month that suggest it is willing to accept some of those changes, but there is division in the Trump administration over whether they are merely symbolic — and empty — gestures.

“None of China’s domestic reforms since December have really addressed the structural issues in the relationship,” said Nick Marro, an Asia and China analyst at the Economist Intelligence Unit. “Progress on increasing U.S. imports or tackling questions over China’s currency don’t really address what the U.S.T.R is really looking at, which are fundamental market access issues facing U.S. companies.”

One of the biggest questions hanging over the trade talks is whether the United States can truly enforce any deal agreed to by Beijing.

Mr. Trump has wielded tariffs as a stick to get Beijing to the bargaining table. But if the tariffs are lifted as part of a trade deal, there is no guarantee that China will live up to any commitments. American officials, who say China has broken promises in the past, have discussed mechanisms such as “snapback” tariffs that would be reimposed if China does not follow through. Another option is “carousel” tariffs that would hit different portions of Chinese products to prevent its economy from becoming immune to the pain of the duties.

China skeptics in the Trump administration fear that the Chinese will say anything to delay the increase in tariff rates on March 2 and to get Mr. Trump to roll back the tariffs that are already in place. At that point they expect China to wait out the rest of Mr. Trump’s term and hope for a more dovish successor.

There are also differing opinions in the Trump administration about how much pressure it can put on China’s economy without endangering its own economic fortunes. If additional tariffs cause the Chinese economy to further contract, it would likely come back to bite the United States.

On Wednesday, Jerome H. Powell, the chairman of the Federal Reserve, said the United States economy does not exist in a bubble and faces risks when other major economies stumble. China’s economic woes, he implied, could eventually cause contagion in the United States.

“We have seen some crosscurrents and conflicting signals about the outlook,” Mr. Powell said. “Growth has slowed in some major foreign economies.”

He added, “We’ve seen that in China and in Western Europe.”

By Alan Rappeport
The New York Times


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