Both the U.S. and China returned home with little to show for their efforts after high-level trade talks between the two countries Wednesday.
After a long day of meetings, the U.S. was only able to claim that “China acknowledged our shared objective to reduce the trade deficit which both sides will work cooperatively to achieve,” but the U.S. and Chinese trade representatives failed to agree on how best to alleviate the $347 billion trade deficit that accounts for roughly 70 percent of the U.S. global imbalance, according to the Wall Street Journal.
China refused to yield ground on issues of importance to the U.S., a senior U.S. official told the New York Times, explaining that Beijing is unwilling to further open financial services markets, reduce its excess steel capacity, or lower the high tariffs on auto exports to China, thereby reducing government subsidies to state-owned enterprises, lifting data localization requirements for foreign companies, and stopping other relevant activities that give China an advantage over the U.S. in bilateral trade.
China, overlooking regulations hurting U.S. exports, suggested that the U.S. should focus less on restricting Chinese imports and more on increasing exports to China, encouraging the U.S. to lift restrictions on exports of high-tech products to China. America’s full spectrum dominance is largely built upon its advanced technology, and there are concerns that exporting high-tech products to China’s commercial sectors may unintentionally aid China’s efforts to modernize its military.
Despite U.S. demands, China continues to bend the rules in order to give its companies an unfair edge over other international competitors.
The U.S.-China Comprehensive Economic Dialogue, the follow-up to the 100-day trade plan agreed to in April, ended without any fanfare, joint statements, or press conferences. In fact, the planned news conferences were cancelled, signaling a major breakdown in talks.
The Chinese Ministry of Foreign Affairs painted the talks in a positive light, calling the meetings “innovative, practical and constructive.” The Chinese Embassy in Washington told reporters that the two sides made “significant progress,” despite evidence that negotiations failed to produce any real results.
When President Donald Trump met Chinese President Xi Jinping in Mar-a-Lago in April, the two agreed to address the deficit and pursue positive trade relations that benefit both countries. While Trump railed against China on the campaign trail for its unacceptable trade practices, he changed his stance after taking office, agreeing to offer China a better trade deal if Beijing increased pressure on Pyongyang in order to resolve the North Korean nuclear threat and the crisis on the Korean Peninsula.
China was also more conciliatory, permitting the U.S. to export beef to China after a 14-year ban and granting limited access to Chinese financial service sectors. The Trump team initially heralded this achievement as a “herculean” accomplishment.
China suspended coal imports from North Korea, cutting off an important source of income for the North Korean regime, but data from the first quarter of this year suggests that Chinese trade with North Korea has increased, causing the president to move from friendship to frustration with regards to relations with China.
Tensions between Washington and Beijing are rising as North Korean provocations, such as the testing of an intercontinental ballistic missile, continue. As China has been hesitant to put the kind of pressure on Pyongyang that Trump expects, the administration has begun putting pressure on Beijing.
The Trump administration has conducted two freedom-of-navigation operations in the South China Sea, as well as bomber overflights, blacklisted a Chinese bank for illegally cooperating with North Korea, with officials warning that more sanctions may be coming down the pipe, approved the sale of weapons to Taiwan, and criticized China’s human rights record.
The U.S. is considering tougher steel tariffs on Chinese steel exports, which have been dragging down steel prices globally and hurting other competitors, and in the wake of this largely unsuccessful meeting, the U.S. may pursue even harsher policies to protect U.S. interests at home and abroad.
“Many expected at the 100-day point we would have much more substantive points of progress,” Nicholas Hardy, a China scholar at the Peterson Institute for International Economics, explained to the WSJ, adding that U.S.-China relations are “very uncertain and subject to very high risks.”
“We are disappointed the Comprehensive Economic Dialogue ended at an apparent impasse,” John Frisbie, the president of the U.S.-China Business Council, told reporters. “It is important for governments to take tangible steps to address longstanding issues and ensure the commercial relationship remains a source of stability in the overall relationship.”
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