China’s Top Negotiator Heads to Washington Following Trump’s Trade War Threat

May 7, 2019, 10:10 AM UTC
Workers prepare a container at the port in Qingdao, China's eastern Shandong province, on January 14, 2019. - China's global trade volume rose last year but its surplus fell again as its imports outpaced its exports, official data released on January 14 showed amid a bruising trade war with the United States. (Photo by STR / AFP) / China OUT (Photo credit should read STR/AFP/Getty Images)
STR/AFP/Getty Images

China’s top trade negotiator Liu He will visit the U.S. this week for a new round of high-wire talks, in a sign Beijing is battling to keep negotiations on track after President Donald Trump ratcheted up pressure with plans to raise tariffs on Chinese goods Friday.

Vice Premier Liu’s trip May 9-10 came at the invitation of U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, according to a statement Tuesday on the Chinese Ministry of Commerce website. On Monday, authorities were said to be considering a delay to the trip, according to people familiar with the plans.

Stocks in Asia pared losses and U.S. equity futures trimmed declines amid signs that talks between the world’s two largest economies hadn’t fallen apart. Treasury yields edged higher and the dollar was steady.

The latest twist sets up Thursday as a crucial moment in the yearlong trade war with potentially huge ramifications for companies, markets, consumers and politicians in both nations: With a U.S. ultimatum now overhead, will Liu offer enough concessions to stave off higher tariffs or will Chinese authorities play hardball and respond with retaliatory measures?

“The fact that China sends a delegation to the U.S. shows it is still willing to solve the dispute by negotiations regardless of what the U.S. is saying,” said Lu Xiang at the state-run Chinese Academy of Social Sciences in Beijing. “If the Trump administration follows through with the tariffs threats on Friday, I think it means the talks fall apart. We then need to be prepared for worse than worst.”

The trade talks were cast into doubt after Trump’s surprise announcement over Twitter on Sunday that he planned to raise tariffs on $200 billion of Chinese goods to 25 percent from 10 percent because talks were moving too slowly. The president said he may also impose duties “shortly” on $325 billion of Chinese goods that aren’t currently covered, a move that would hit virtually all imports from the Asian nation.

The Trump administration plans to increase duties on Chinese imports at 12:01 a.m. on May 10, Lighthizer said Monday. “We felt we were on track to get somewhere. Over the course of last week we have seen an erosion of commitments by China. That in our view is unacceptable,” he said, adding that significant issues remain unresolved, including whether tariffs will remain in place.

China was “well prepared for other potential outcomes” of its trade talks with the U.S., “including a temporary breakdown in talks,” the Global Times newspaper said in an editorial Tuesday. The door wasn’t closed to talks even if the U.S. raises tariffs, the newspaper said.

Lighthizer and Mnuchin told reporters on Monday that the Chinese backsliding became apparent during their visit to Beijing last week, but that they had been reassured by their Chinese interlocutors that everything would turn out.

That changed over the weekend when China sent through a new draft of an agreement that included them pulling back on language in the text on a number of issues, which had the “potential to change the deal very dramatically,” Mnuchin said. At that stage about 90 percent of the pact had been finalized, he said, and the Chinese wanted to reopen areas that had already been negotiated.

“We are not willing to go back on documents that have been negotiated in the past,” he said.

This isn’t the first time an apparent agreement faltered. A year ago, Liu told reporters in Washington that talks with Mnuchin, Lighthizer and Secretary of Commerce Wilbur Ross ended with a pledge not to engage in a trade war.