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The potential easing of the US-China trade tensions is on the horizon, with both economic powerhouses gearing up for discussions in Switzerland. These talks aim to address the ongoing trade dispute and explore avenues for resolution.
High-Level Discussions to Address Trade Dispute
Senior trade representatives from both the United States and China are scheduled to convene this Saturday for the first significant high-level meeting since President Donald Trump imposed tariffs on Chinese goods in January. This meeting signals a possible de-escalation in the economic standoff.
Retaliatory Tariffs and Escalating Tensions
Following the initial US tariffs, Beijing swiftly responded with countermeasures, leading to a period of heightened tension as both nations imposed escalating tariffs on each other’s goods. Currently, new US tariffs on Chinese imports have reached 145%, while certain US exports to China face duties of 125%.
- Weeks of firm rhetoric underscored the strained relationship.
- Each side aimed to portray the other as more eager to negotiate.
Why Now? Factors Leading to the Resumption of Talks
Despite the contentious environment, the decision to meet at the negotiating table raises questions about the underlying motivations and the urgency to find common ground.
Saving Face: Navigating Political Optics
Despite the reciprocal imposition of tariffs, both nations have hinted at a desire to overcome the current impasse. However, neither side wants to appear to be conceding ground, necessitating a delicate approach to negotiations.
Avoiding the Appearance of Weakness
“Neither side wants to appear to be backing down,” stated Stephen Olson, a senior visiting fellow at Singapore’s ISEAS-Yusof Ishak Institute and a former US trade negotiator. He added, “The talks are taking place now because both countries have judged that they can move forward without appearing to have caved in to the other side.”
Differing Narratives on Initiative
While China’s foreign ministry spokesperson Lin Jian emphasized on Wednesday that “the talks are being held at the request of the US,” the commerce ministry framed it as a favor to Washington, citing “calls of US businesses and consumers.”
US Counter-Narrative
The Trump administration, however, asserts that Chinese officials “want to do business very much” due to their economy’s struggles. President Trump addressed these conflicting claims, stating, “They said we initiated? Well, I think they ought to go back and study their files.”
Shifting Tone as Talks Approach
As the scheduled meeting neared, President Trump adopted a more conciliatory tone. “We can all play games. Who made the first call, who didn’t make the – it doesn’t matter,” he remarked to reporters on Thursday. “It only matters what happens in that room.”
Geopolitical Context: Xi’s Visit to Moscow
The timing of the talks is also significant, coinciding with President Xi Jinping’s visit to Moscow, where he was a guest of honor at Moscow’s Victory Day parade commemorating the 80th anniversary of the World War Two victory over Nazi Germany.
China’s Position on the Global Stage
Xi stood alongside global leaders from across the Global South, signaling that China has alternative trade options. It also presents itself as a global leader. This allows Beijing to project strength even as it heads to the negotiating table.
Economic Pressures and Domestic Concerns
Despite assertions of strength, the tariffs are impacting both the US and China.
Impact on China’s Economy
China’s factory output has suffered. According to government data, manufacturing activity in April dipped to its lowest level since December 2023. This week a survey by news outlet Caixin showed services activity at a seven-month low.
- Chinese exporters are managing steep tariffs.
- Stock piling up in warehouses.
- Seeking markets beyond the US.
Pragmatic Perspective
“I think [China] realises that a deal is better than no deal,” says Bert Hofman, a professor at the East Asian Institute in National University Singapore. “So they’ve taken a pragmatic view and said, ‘OK, well we need to get these talks going.'” With the major May Day holiday concluded, officials in Beijing have deemed the timing appropriate for discussions.
Economic Impact on the United States
The tariff-induced uncertainty led to the US economy contracting for the first time in three years. Industries heavily reliant on Chinese-made goods are particularly concerned.
Consumer Impact and Political Repercussions
President Trump has acknowledged that US consumers will experience the effects of the tariffs. Additionally, his approval ratings have declined amid inflation concerns and recession fears, with a majority of Americans expressing dissatisfaction with his focus on tariffs.
Market Reassurance
“Both countries are feeling pressure to provide a bit of reassurance to increasingly nervous markets, businesses, and domestic constituencies,” Mr. Olson observes. “A couple of days of meetings in Geneva will serve that purpose.”
Potential Outcomes and Future Negotiations
Realistic Expectations
While the talks have been met with enthusiasm, a lasting resolution might be some time away.
“Touching Base”
Mr. Hofman suggests that the talks will primarily involve “touching base,” encompassing an “exchange of positions” and, potentially, the establishment of “an agenda [will be] set for future talks,” if progress is made.
Long-Term Negotiations
Comprehensive negotiations could span several months, mirroring the protracted process seen during President Trump’s initial term.
Past Agreements and Unresolved Issues
The “phase one” deal, signed in early 2020 following nearly two years of tariffs, only provisionally addressed some levies. Key issues, such as Chinese government subsidies and a timeline for eliminating remaining tariffs, remained unresolved. Many of these tariffs have persisted into the Biden administration, compounded by President Trump’s recent impositions.
Potential for an Enhanced Agreement
Mr. Olson suggests the possibility of a “phase one deal on steroids,” expanding upon the original agreement to address contentious issues ranging from fentanyl trade to Beijing’s ties with Moscow. However, experts emphasize that these developments are distant prospects.
Systemic Challenges Persist
“The systemic frictions that bedevil the US-China trade relationship will not be solved any time soon,” Mr. Olson concludes. “Geneva will only produce anodyne statements about ‘frank dialogues’ and the desire to keep talking.”