China and United States Trade War
The US and China are without a doubt speaking: The China and United States Trade war could be easing as the world’s two biggest economies prepare for negotiations in Switzerland.
Representatives of the highest trade rank on both sides will meet on Saturday in their inaugural high-level meeting following tariffs directed at China by US President Donald Trump in January.
Beijing responded immediately, and they found themselves exactly in an antagonistic stand-off as the two nations threatened each other with levies. Those are now at 125%, while some Chinese imports to the US have duties of up to 245%.
There have been weeks of sterner, and sometimes really fiery, rhetoric in which each side tried to appear the more desperate of the two.
And yet this weekend, they will sit across each other at the negotiating table.
Saving face
Both have been exchanging tit-for-tat signals to break the deadlock despite several such tit-for-tat tariffs. Except it wasn’t that clear which one would blink first.
“Both sides do not want to look weak,” said Stephen Olson, senior visiting fellow at ISEAS-Yusof Ishak Institute, Singapore, and former U.S. trade negotiator.
“ The discussions are taking place now because both countries have assessed that they can go ahead without making it look as though they have caved in on one side or the other.
Yet in Wednesday’s statement, on the part of the Chinese Ministry of Foreign Affairs spokesperson Lin Jian, noted that, “the talks are being held at the request of the US”.
And it was submitted to commerce ministry as a kind of favour to Washington, where was “answering the calls of US businesses and consumers”.
Yet, the Trump administration believes it is the Chinese officials who “want to do business very much” because “their economy is collapsing”.
“They said we initiated? I guess they should go and re-read their files, ”Trump said Wednesday at the White House.
But, as the talk focused, there president struck a more diplomatic tone: “We can all play games. Who called first, who didn’t – that is of no consequence,” he told reporters Thursday. All that is important is what happens in that room.
This tactic is also working well for Beijing, for it is during Xi’s visit to Moscow. He was the guest of honour in Moscow at Victory Day parades on Friday for the 80 th anniversary of the victory over Nazi Germany in World War Two.
The pressure is on
Trump insists America will become stronger with the tariffs, and Beijing has said it will “fight till the end”-but the fact is they are crippling both nations.
Factory output in China has suffered, according to official numbers. Manufacturing activity in April fell to a level at which it had been in December 2023. And a Caixin news outlet survey this week indicated that services activity is at a seven-month low.
The BBC reported that Chinese exporters have been taking things on the chin, with their stocks piling up in warehouses even as they strike a defiant note and try to find markets outside the US.
“I think [China] realises that a deal is better than no deal”, says Bert Hofman, professor at the East Asian Institute in the National University of Singapore.
So they’ve taken a pragmatic view and said, ‘Here we go, we need to get these talks going. ’.
And so with the main May Day holiday in China out of the way, officials in Beijing have thought the moment is ripe to speak.
On the other hand, the uncertainty resulting from tariffs caused the US economy to shrink for the first time in three years.
And even businesses that have largely relied on goods manufactured in China are particularly scared. The owner of a Los Angeles toy company told the BBC that they were “looking at the total implosion of the supply chain”.
Trump himself has admitted that US consumers will pay the price.
American kids might “have two dolls instead of 30 dolls”, he said in a cabinet meeting this month, “and maybe the two dolls will cost a couple bucks more than they would normally”.
Concerns over inflation, possible recession have also seen Trump’s approval ratings sink with over 60% of Americans silica that he was too focused on tariffs.
“Both countries are under pressure to give a bit of reassurance to ever more jittery markets, businesses, and domestic constituencies,” Mr Olson says.
A couple of days of meetings in Geneva will do that work.
What happens next?
Although the talks have been taken with optimism, a deal can take a long time to materialise.
Mostly, they will deal with “touching base”, Mr Hofman said, and that can look like an “exchange of positions” and, hopefully, an “agenda [will be] set for future talks”.
Overall, the negotiations are likely to take months, just like Trump’s first term did.
After almost two years of hit and retaliate tariffs, the US and China signed a “phase one” deal at the start of 2020 to stop or lower some of the tariffs. Even then, it did not cover thornier issues such as Chinese government subsidies for key sectors of the economy or a phasing out of the remaining tariffs.
Most of them managed to withstand until Joe Biden’s presidency and Trump’s latest tariffs pile up on top of the growing older levies.
What might be emerging this time is “a phase one deal on steroids”, Mr Olson said. That is, it would take the deal further than it had gone before and seek to deal with flashpoints. There are plenty, ranging from the illegal fentanyl trade, where Washington would like to see China crack down harder, to Beijing’s relations with Moscow.
But this is all in the remote future, experts warn.
“The systemic frictions that bedevil the US-China trade relationship will not be solved any time soon,” says Mr Olson.
“Geneva will only be able to produce anodyne set pieces about ‘frank dialogues’ and a wish to carry on talking.
Talks or no talks: Who blinks first in US-China trade war?
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