The two biggest economies in the world are trying to prevent a trade war from erupting between them. Recent developments have caused the US and China to impose higher taxes on each others products and goods, which caused tensions between the superpowers to rise.
This week, the top advisers of US President Donald Trump, including Robert Lighthizer, US Trade Representative; Larry Kudlow, the President’s top adviser for economics; and Steven Mnuchin, the Treasury Secretary, will be arriving in Beijing to meetings that aim to calm the tension between them and to prevent a full-scale trade war.
President Trump is confident that the meetings on May 3 and 4 will go well. He said, “I think we’ve got a very good chance of making a deal.”
However, not everyone is as nearly as optimistic as Mr. Trump is. Former senior trade official under President Barack Obama and CEO of consultancy Monarch Global Strategies, Michael Camunez, believes that the team of negotiators from the US has no clear strategy for reaching an agreement with China.
On its part, China has already begun to manage expectations for the talks. Hua Chunying, spokeswoman for China’s Foreign Ministry, has said that it would not be “realistic to expect to have all issues resolved through one consultation,” considering the complications of the trade relationship between the two large economies.
She also said, “As long as the US maintains its sincerity in preserving the overall stability of bilateral trade ties, and adopts an attitude of mutual respect, equal consultations and win-win cooperation, we believe our consultations are going to be constructive.”
The US will be pushing for China to increase exports in order to lessen its considerable trade deficit with China, which is now at $375 billion. The team of negotiators is also expected to ask China to end an industrial policy which strong-arms foreign companies to share their technologies while subsidizing Chinese rival firms.
Derek Scissors, a scholar at Washington-based think tank, the American Enterprise Institute, believes that at most, the US may possibly get a short-time solution, which could include Beijing buying more American imports, as well as sharing information concerning China’s automotive sector.
China could also make a promise to purchase $50 billion dollars more of US goods annually, which would be a triumph for the Trump administration, but Mr. Scissors does not believe that this will come to pass.
Meanwhile, the head of Hong Kong research firm Asia Analytica, Pauline Loong, says that Beijing would have a hard time finding reasons to buy more American goods since there simply aren’t a lot of products that China needs from America, aside from high-tech products. Rather unfortunately, ZTE (ZTCOF), maker of smartphones in China, was recently banned from buying components from US tech firms for seven years.
Ms. Loong believes that it’s far more likely that Beijing will grant access to its markets to foreign countries.
The President of China, Xi Jinping, announced in April that China would open its economy to investors and international firms. However, President Trump said at a rally in Michigan last Saturday that this promise was “not enough.”
Despite China’s pledges of openness to foreign firms, it has been difficult to break into Chinese markets because of the burdensome requirements placed on businesses, as well as frequent delays. These have served as a disincentive to many companies. Ms. Loong said that in spite of Beijing’s well-intentioned professions, “what it has always been reluctant to offer is specifics.”
In 2017 Beijing announced that foreign firms would finally be allowed to control banks and investment companies in China, opening up the way for Wall Street to come in. However, the amount of assets that international investment companies need to have in China has been daunting.
Furthermore, Jacob Parker, vice president of lobby group the US-China Business Council, said that US firms that already operate in China are asking Washington to put pressure on the Chinese government to ramp up efforts to stop the thievery of intellectual property, forced technology transfers to Chinese companies, and counterfeiting.
These concerns has been a particularly disputable, since China is seeking to transform from a low-end manufacturing economy into more high-tech territory.
The US President has also called out China on these issues, and said they were a reason why higher tariffs have been imposed. However, Mr. Parker believes that because much of the administration’s focus is on the trade deficit, the issues that face US companies already operating in China will be brushed aside. Mr. Parker further said, “We’d like to see the Trump administration clearly articulate what it wants China to do.”