The United States and China are officially resuming their trade negotiations on higher executive level today. While lower-ranking officers began communicating again last month, today the Chinese Vice Prime Minister Lie He is in the United States, where he will negotiate directly with Treasury Secretary Steve Mnuchin, as well as Donald Trump’s Trade Representative, Robert Lighthizer.
The stakes for this meeting are huge. The trade conflict between the world’s two largest economies has been going on for well over a year and markets all over the world are experiencing its negative fallout.
China finds itself in a difficult spot, however. The Chinese government has condemned the tariff tactic of the United States as bullying multiple times and has stated it would never sign an agreement that hurts Chinese interests. The latter statement is at odds with some of the US demands. Nevertheless, if the two sides fail to reach an agreement, China will face tariffs on virtually everything it exports to the United States starting next week.
The success of the talks seems especially uncertain because just this week the United States added 28 Chinese companies on its Entity List, banning them from buying US goods and technology. The States also added new visa restrictions for Chinese officials. Making such changes so close to the start of the negotiations could be seen as bad diplomacy by the Chinese.
If the talks fail, expect higher risk aversion.
