What does winning the US-China trade war look like for Donald Trump and Xi Jinping?

29 Jan, 2019 - 19:01 0 Views
What does winning the US-China trade war look like for Donald Trump and Xi Jinping? Xi Jinping

eBusiness Weekly

The United States and China have just five weeks to come up with a deal that both nations can hail as “wins” in their closely watched trade war, and they’re each asking the other for major concessions heading into the next round of talks in Washington next week.

But what does “winning” actually look like for US President Donald Trump and Chinese President Xi Jinping – assuming neither leader gets everything he wants?

For Trump to declare victory by the goals he set for himself, he needs China to further open its market to American exports, especially the agricultural goods hit hard in the trade war. He also is pushing to stop China from forcing US companies to hand over valuable technology, but such moves would require drastic changes on the part of Beijing.

For his part, Xi mainly needs Trump to eliminate or sharply reduce the tariffs the United States has imposed on US$250 billion worth of Chinese goods.

Such moves would help restore badly shaken confidence in the US-China trade relationship at a time when China’s economic fundamentals are deteriorating.

The United States also wants the agreement to include provisions to ensure that China honours its commitments.

Depending on how far China is willing to go, that could be a point of compromise that paves the way for the US to back off on some of its more difficult demands.

Some say the most the two sides can achieve in the near term is a “mini-deal” that would keep current duties in place while negotiations continue.

“My baseline assumption is that very close to the deadline, we will come up with a deal that certainly will not be comprehensive, durable and long-lasting by any means but at least allows both sides some breathing room by de-escalating hostilities or at least a cessation of future hostilities,” Eswar Prasad, former China director at the International Monetary Fund, said last week in a speech in Washington.

Face-to-face trade talks between the world’s two largest economies will resume on January 30, when Chinese Vice-Premier Liu He is scheduled to go to Washington for two days of meetings with a team of US officials led by Trade Representative Robert Lighthizer.

Whether the next set of talks will lead to a real deal is uncertain, in part because of Trump’s erratic personality and penchant for making unpredictable commentary via Twitter.

Donald Trump

Stocks tumbled Tuesday after The Financial Times reported that the United States had rejected China’s offer of new, in-person, lower-level talks to be held this week because of a lack of progress on some of the main US demands.

But China watchers said such cancellations were normal, and face-to-face consultations were not necessary for Liu’s coming visit.

White House chief economic adviser Larry Kudlow, in an interview with CNBC on Tuesday, denied any meeting was ever scheduled for this week. He added the two countries remain in “constant communication” ahead of the Liu-Lighthizer meeting next week.

Kudlow also emphasised the United States still has big goals for the talks.

“I acknowledge the degree of difficulty, but it is a crucial point for the United States side,” Kudlow said. “We have got to deal with these vexing problems of [intellectual property] theft and the forced transfer of technology, the lack of American ownership of its own companies in China, cyber interference with various corporations, along with various tariff and non-tariff barriers.”

At the same time, both countries are staring down tough economic outlooks.

Trump is in the grips of a month-long government shutdown triggered by his demand for border wall funding that has diminished his approval ratings and risks causing long-term damage to the US government and its economy.

Xi is overseeing a drastic slowdown in China’s economic growth, which adds pressure on him to find a quick end to the trade war. In the last quarter of 2018, China reported the slowest growth rate since its government began publishing quarterly figures in 1992.

The two sides are trying to reach a deal before March 2, when Trump says he will order his government to increase duties on US$200 billion worth of Chinese goods to 25 per cent, a sharp rise from 10 per cent currently.

A simple win could involve commitments from China to purchase specified amounts of US goods by certain target dates. On China’s side, anything that lifts some or all of the tariffs on its exports to the US would be a victory.

Some analysts have speculated that Trump – faced with a jittery stock market and concerns that the government shutdown could help nudge the US economy into recession – will settle for “a light deal” consisting mainly of Chinese purchases and vague promises.

In response, two influential business groups, the US Chamber of Commerce and the American Chamber of Commerce in China, are urging Trump to stand by his pledge to press for meaningful reforms. South China Morning Post

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