China’s Ministry of Commerce says high-level trade talks between officials from the world’s two biggest economies have resumed.  But whether or not Washington and Beijing will be able to strike a deal and avoid a looming sharp hike in tariffs on $200 billion in Chinese goods remains uncertain.

 

Commerce ministry spokesman Gao Feng says the resumption of talks began after U.S. President Donald Trump and Chinese leader Xi Jinping spoke on the phone on November 1st.

 

“Working groups [of both sides] are keeping close contact to carefully carry out a consensus that the two leaders reached during the call,” Gao Feng said Thursday.  He added that companies in both the United States and China have been affected and are responding to the trade dispute, which has triggered tit-for-tat in tariffs on goods.

 

After the phone call earlier this month, Trump said he thought the two could make a deal, but added Washington is prepared to levy more tariffs on Chinese goods if no progress is made.

 

On January 1, Washington’s 10 percent tariff rate on $200 billion in Chinese goods is set to rise to 25 percent.  Trump has also said that if the two can’t reach a deal, Washington would impose tariffs on all remaining Chinese imports, about $267 billion worth. 

 

Trump and Xi are scheduled to meet in the coming weeks on the sidelines of a leaders summit for the Group of 20 nations in Buenos Aires, Argentina.  Earlier this week, there were reports that Chinese Vice Premier Liu He, the country’s top trade negotiator would travel to Washington.

 

According to a Reuters report Thursday that quotes three U.S. government sources, China has delivered a written response to U.S. demands for wide-ranging trade reforms.

 

It was not immediately clear if the response could help bridge a wide gap between the two on trade or meet Trump’s demands for change.

 

The U.S. president has repeatedly criticized Chinese practices of industrial subsidies, intellectual property theft, the lack of a level playing field for U.S. companies in China and the trade deficit.

 

What happens next depends on Beijing’s attitude, said Darson Chiu, a research fellow at the Taiwan Institute for Economic Research.

 

“If Beijing is willing, on the one hand, to reduce the scope of unequal bilateral trade and guarantee that U.S. intellectual property rights will not be infringed upon or forced to hand over technology, there is a good chance the two can reach a consensus,” he said.

 

One way Beijing could do that is by offering to reach a bilateral free trade deal with Washington that includes all of the concerns Trump has addressed: be it currency manipulation, intellectual property rights, concerns about state-owned enterprises.

 

“That way Trump would have to accept [the offer],” Chiu said.  “And at the same time, it would help get those with vested interests out of the way and remove longstanding obstacles to reform that policymakers in China face.”

 

Chiu admits that such a solution is easier said than done and there are many with less liberal views in China.  Those with vested interests, the heads of state-owned enterprises also keep arguing that they can help China weather the storm.

 

At the very least, what the two could hope for is a sort of lowering of tensions, some analysts note.  China is willing to make some concessions, as long as the demands are not too excessive, said Shi Yinhong, a political scientist at Renmin University.

 

“China has long agreed to make concessions: import as many U.S. goods as possible and greatly relax local market access for U.S. companies.  But these may not please Trump, who wants China to fundamentally restructure its economic model and major industrial policies,” Shi said.

 

The United States could also create a monitoring mechanism to ensure China walks its talk this time, he adds.

 

Shi said that while China wants reform too, in his view, the best that could be hoped for is a trade war ceasefire.

 

What that means is the United States would suspend its tariff hike on $200 billion in Chinese goods in exchange for concrete concessions from China, including those Beijing made during negotiations in July.  At the same time, Washington is unlikely to drop its restrictions or increased scrutiny of Chinese high-tech firms, Shi said.
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