On Wednesday, October 9, US Trade Representative R. Lighthizer and Treasury Secretary S. Mnuchin are once again welcoming Chinese Vice Premier Liu He to Washington for a new round of negotiations on trade issues. This is the thirteenth such meeting since Donald Trump came to power.
The United States is seeking an ambitious and comprehensive trade deal between the two countries. Specifically, they intend to achieve a re-balancing of trade, a guarantee for their investments in China, and protection for American intellectual property.
China, for its part, is only willing to discuss a limited number of topics. There is no question of them reviewing their industrial policy and their system of government subsidies, which is nevertheless an important request from Washington.
Unfavorable climate to negotiate
These discussions are, therefore, taking place in an unfavorable atmosphere. The Chinese delegation has warned that it will leave one day earlier than expected, which is not a good sign. The United States plans to introduce new taxes on 240 billion dollars of Chinese goods on October 14. In addition, the USUS administration has increased pressure on the Chinese authorities by introducing new sanctions against entities responsible for the repression of the Uighurs, the main Muslim ethnic group in northwest China.
Chinese government and Communist Party officials suspected of participating in the crackdown will be banned from entering China, while Trade Secretary Wilbur Ross has announced that 28 Chinese “entities” (including 8 large companies), mainly active in the fields of video surveillance and artificial intelligence, will now need a special license to sell to the United States.
The American press has indicated that the administration could also limit SUS investment in China. Not a day goes by without a new anti-Chinese measure in the United States. It is therefore very unlikely that these discussions, scheduled to last two days, will lead to an important agreement.
However, Donald Trump says he still wants a global agreement with Beijing rather than a partial treaty. On Friday, October 4, he again indicated that he wanted “a good agreement” or no agreement at all. The Republican President is campaigning for re-election and is defending American interests. On September 21, he again challenged China, postponing the conclusion of an agreement until after the next presidential elections in November 2020.
According to him, the United States is in a strong position, while “China really wants an agreement” because the tariffs imposed by Washington “are killing its economy.”
Business slowdown in China
Signs of economic slowdowns are indeed visible in China. In September, activity in the services sector experienced its slowest growth rate in seven months.
But the American economy is also beginning to suffer from the uncertainties created by this conflict, which has been going on for more than a year and a half. And in the absence of an agreement, the United States plans to introduce new taxes on December 15 next.
If these new sanctions are implemented, 95% of Chinese products imported into the United States will be covered by 20% customs duties. And this is likely to result in price increases for USUS consumers, as importers will not be able to absorb the full increase.
Globally, growth could be cut by about 0.7 percentage points by 2020 as a result of this trade war, according to the IMF. “That’s about the size of Switzerland’s economy,” said K. Georgieva, the new IMF Managing Director.
The planet’s growth “is now experiencing a synchronized slowdown,” she lamented. It is explained by the fact that investors are reluctant to launch due to the climate of uncertainty created by this trade dispute.