Five Things to Know About US-Chinese Trade Negotiations

The United States and China have held their first face-to-face trade talks since Presidents Donald Trump and Xi Jinping agreed Dec. 1 to postpone further tariff increases in the trade war between the world’s two biggest economies.

The meetings are the start of what economists say are likely to be lengthy, contentious negotiations over U.S. complaints that Beijing’s technology ambitions violate its trade obligations.

Beijing and Washington have raised tariffs on billions of dollars of each other’s goods, prompting fears the conflict will dampen global economic growth that is showing signs of slowing.

Here are five things to know about the biggest trade conflict to date between the U.S. and China:

WHAT IS THE DISPUTE?

Trump raised import duties on Chinese goods in July over longstanding complaints Beijing steals technology or pressures foreign companies to hand it over. The Trump administration also objects to Chinese industry development plans that Washington, Europe, Japan and other trading partners say violate Beijing’s market-opening obligations.

U.S. officials worry that China’s rise as a potential competitor in telecoms, solar power, electric cars and other fields might erode American industrial leadership. They want Beijing to roll back government efforts to create global competitors in robotics and other fields.

Those complaints are a rejection of the ruling Communist Party’s blueprint for making China a powerful and rich nation.

WHAT ARE THE STAKES?

Trump has imposed 25 percent tariffs on $50 billion of Chinese goods and 10 percent duties on $200 billion of imports. Beijing slapped 25 percent penalties on $50 billion of American goods, targeting farm areas that supported Trump in the 2016 election, and 10 percent on $60 billion of goods. Chinese regulators have slowed customs clearance for American companies and suspended issuing licenses in finance and other industries.

China’s exports to the United States held up through the end of 2018 as its exporters rushed to fill orders before more tariff hikes were imposed. Economists expect American orders from China to slump this year, at a time when global consumer demand is weakening. Millions of Chinese jobs are on the line.

WHAT IS THE TIME LINE?

Trump and Xi agreed Dec. 1 to postpone new tariff increases by 90 days while they negotiate. Economists say that is too little time to resolve a laundry list of irritants in trade relations. They say Beijing needs to show enough progress to persuade Trump to extend his deadline — possibly sweetening the deal by committing to buy American soybeans, gas or other exports.

Both governments say they want a settlement, but economists say resolving their conflicts and working out how to enforce terms could be long and politically fraught. Some suggest it might be years before the final penalty tariffs are removed.

WHAT ARE POSSIBLE OUTCOMES?

The two governments have hinted at the outlines of a possible deal.

During talks in May in Beijing, American envoys gave Chinese officials demands that included cutting subsidies for high-tech industries and narrowing China’s trade surplus. According to The Wall Street Journal, Chinese officials responded by breaking the list into 142 items. They said 30 to 40 percent could be done immediately, a similar amount could be negotiated over time and 20 percent were off-limits for national security or other reasons.

Beijing might demand changes to U.S. curbs on exports of “dual use” technology with possible military applications. They complain China’s companies are treated unfairly in national security reviews of proposed corporate acquisitions, though almost all deals are approved unchanged.

WHAT HAS BEEN THE ECONOMIC FALLOUT SO FAR?

Forecasters at the International Monetary Fund and the Organization for Economic Cooperation and Development have downgraded their outlook for the global economy, citing among other things the costs and uncertainty arising from the standoff between the U.S. and China. Surveying economic conditions across the United States, the Federal Reserve found last month that many companies complained that the tariffs had raised expenses, forcing them to decide whether to increase prices or absorb the costs.

Although the overall U.S. economy remains strong, the Institute for Supply Management’s manufacturing index plunged in December to the lowest level since November 2016. Manufacturers complained that the tariff war created uncertainty about whether and where to invest. “There’s a lot of uncertainty,” said Timothy Fiore, chairman of ISM’s manufacturing survey committee. “Things just aren’t getting resolved. The thing that businesses hate is uncertainty, and we’ve got a ton of it.”