American officials are due in Beijing Monday for talks aimed at easing the U.S.-China trade battle that threatens to hobble global economic growth.
The talks are going ahead despite tension over the arrest of a Chinese tech executive in Canada on U.S. charges related to possible violations of trade sanctions on Iran.
The two governments have expressed interest in a settlement but have given no indication that their stances have shifted. After several tit-for-tat tariff increases last year, Presidents Donald Trump and Xi Jinping agreed Dec. 1 to postpone further hikes.
The two countries hope to have “positive and constructive discussions,” said a Chinese foreign ministry spokesman, Lu Kang.
The trade war has its roots in American anxiety about China’s emergence as a competitor in telecoms, solar power and other technologies and complaints by Washington, Europe and other trading partners that Beijing’s tactics violate its market-opening obligations.
China’s leaders have offered to narrow its politically sensitive trade surplus with the United States by purchasing more soybeans, natural gas and other American exports. But they reject pressure to scrap technology initiatives they see as a path to prosperity and global influence.
Both governments face economic pressure to reach a settlement.
Chinese economic growth fell to a post-global crisis low of 6.5 per cent in the quarter ending in September. Auto sales tumbled 16 per cent in November over a year earlier and weak real estate sales are forcing developers to cut prices.
Third-quarter U.S. growth was 3.4 per cent and unemployment is at a five-decade low. But surveys show consumer confidence is weakening due to concern that growth will moderate this year.
Beijing has tried in vain to recruit France, Germany, South Korea and other governments as allies against Trump. They criticize his tactics but echo U.S. complaints about Chinese industrial policy and market barriers.
The European Union filed its own challenge in the World Trade Organization in June against Chinese regulations it said hamper the ability of foreign companies to protect and profit from their own technology.
Washington has imposed punitive tariffs of up to 25 per cent on $250 billion of Chinese goods. Beijing responded by imposing penalties on $110 billion of American goods, slowing down customs clearance for U.S. companies and suspending issuance of licenses in finance and other industries.
Trump and Xi agreed to a 90-day postponement of more tariff increases due to take effect Jan. 1. But economists say that is too little time to resolve the sprawling disputes that bedevil U.S.-Chinese relations.
The decision to hold this week’s talks at a deputy minister level reflects the need to work out technical details before higher-level officials make “hard political decisions on major issues,” said Tu Xinquan, director of the China Institute for World Trade Organization Studies at the University of International Business and Economics in Beijing.
The U.S. team will include Deputy U.S. Trade Rep. Jeffrey Gerrish; the top U.S. trade negotiator on agricultural issues, Gregg Doud; Treasury Under Secretary for International Affairs David Malpass; Commerce Under Secretary for International Trade Gilbert Kaplan; the U.S. Agriculture Department’s undersecretary for trade and foreign affairs, Ted McKinney; the U.S. Department of Energy’s assistant secretary for fossil energy, Steven Winberg; and other senior officials.
The makeup of the U.S. team was announced Friday by the trade representative’s office.
The dispute has rattled companies and financial markets that worry it will drag on global economic growth that is showing signs of declining.
For their part, Chinese officials are unhappy with U.S. curbs on exports of “dual use” technology with possible military applications. They complain China’s companies are treated unfairly in national security reviews of proposed corporate acquisitions, though almost all deals are approved unchanged.
Chinese exports to the United States held up through late 2018 despite Trump’s tariff hikes. But that was due partly to exporters rushing to beat new duties — a trend that is fading.
Some manufacturers that serve the United States have shifted production to other countries.
The investment bank UBS said Friday that 37 per cent of 200 manufacturers surveyed said they have shifted out of China over the past 12 months. It said the threat of U.S. tariff hikes was the “dominating factor” for nearly half, while others moved due to higher costs or tighter environmental regulation.
Another 33 per cent of companies said they plan to move out of China in the next six to 12 months, according to the UBS report.
Despite the December truce, “most firms expect trade war to escalate,” the report said.