On Thursday, Beijing announced a new round of trade talks with Washington. The talks, confirmed by Trump’s economic advisor, Larry Kudlow, are a step in the right direction, but don’t hold your breath for an agreement.
The talks, scheduled for late August, come as the U.S. and China are increasingly at odds with each other over the U.S.-initiated trade war. The U.S. has accused China of unfair practices and President Trump has vowed to negotiate a new deal. To each tariff imposed by the U.S., China has retaliated with tariffs of its own, hurting the economies of both countries.
The goal of the meeting is to de-escalate the ongoing trade war and hopefully lay the groundwork for a long-term solution to stabilize trade between the U.S. and China — the two largest economies in the world.
Despite the high stakes, this particular round of talks is unlikely to yield a new agreement or end the trade war.
For one thing, the meeting will be low-level. Unlike, for example, Trump’s meeting with E.U. Commission chief, Jean-Claude Juncker, which led to an announcement of a reduction of trade tensions, the new talks with China won’t feature such prominent leadership.
Instead, the Chinese delegation will be headed by Vice Minister of Commerce Wang Shouwen, while the U.S. side will be led by Under Secretary of Treasury for International Affairs David Malpass. This level of talks signals that although both China and the U.S. are interested in continuing the conversation, neither side anticipates reaching an agreement any time soon.
On the U.S. side, the leadership also matters since the talks will be led by the U.S. Treasury Department, not the U.S. trade representative. Part of this may be strategic, as the Treasury Department led by Steven Mnuchin is much less pro-tariff than current U.S. Trade Representative Robert Lighthizer — but an agreement with China would still require input from the USTR.
Finally, the most important block preventing an agreement between the U.S. and China has less to do with who represents the countries than the fact that a huge rift remains between U.S. and Chinese goals. China has indicated little willingness to improve market access, protect intellectual property, prevent the forced transfer of technology, or make progress on the other grievances leveled by the U.S. For its part, the U.S. seems unlikely to remove tariffs without concessions from China and without a commitment to cut the trade deficit — a favorite talking point of President Trump.
The consequences of even a low-level meeting with little prospect for concrete results, however, will be worth watching.
It’s probably a success if the two sides make even a little progress towards an agreement to prevent the trade war from getting even worse. After all, Washington has promised new tariffs set to start on Aug. 23, and China has already said it would respond with additional tariffs of its own further escalate the trade war. The talks, set to happen either around the same time as these tariffs enter into force or just after, might be a way to head off some of the consequences or, at least, ensure open channels of negotiations as tariffs start to hurt more.
In short, the announcement of trade talks is good. But I would be cautious with your optimism about a China-U.S. agreement.
