US-China trade talks resume amid barrage of mutual criticism

US-China trade talks resume amid barrage of mutual criticism

Donald Trump said there were “no signs” that China was moving ahead with promised purchases of US farm goods, adding to a barrage of mutual criticism as a new round of trade talks began in Shanghai.

“That is the problem with China, they just don’t come through,” Mr Trump wrote in a tweet on Tuesday morning. “My team is negotiating with them now, but they always change the deal in the end to their benefit.”

The two-day meeting between US trade representative Robert Lighthizer, Treasury secretary Steven Mnuchin and their Chinese counterpart, vice-premier Liu He, was organised after Mr Trump and Xi Jinping agreed to a trade war truce at the G20 meeting in Osaka only a month ago.

Optimism has been dented since then. Mr Trump warned last week that there might be no deal before the next US presidential elections in November 2020. On Friday he attacked China’s claims to developing economy status at the World Trade Organization, saying it was among a group of nations that are “cheating the system at the expense of the USA”.

China’s foreign ministry retorted that the Trump administration’s criticism “further exposed its wayward arrogance and selfishness”.

On Monday, Mr Trump lashed out at both China and the EU for their loose monetary policy, amid his latest attack on the US Federal Reserve — and then followed up on Tuesday with more blustery rhetoric against Beijing’s failure to make concessions.

Expectations for a big breakthrough are “modest”, said Jake Parker, head of the US-China Business Council’s Beijing office. “We hope both sides will take a pragmatic and realistic approach to compromise.”

Meanwhile, political pressure mounted again on Mr Trump from Capitol Hill not to “sell out” to Beijing. “This is a game of who is stronger and who can last longer — I hope it’s us,” Chuck Schumer, the top Democrat in the Senate, said on the floor of the upper house.

Mr Schumer added that the Trump administration should “not give up leverage on Huawei in exchange for anything less than concrete commitments on market access, intellectual property theft and forced technology transfers”.

Rather than a final deal, outcomes this time could include an agreement on what issues to tackle, and some agricultural purchases by Chinese companies, Mr Parker said.

“Hopefully we’ll go back to where we were in May. And we, very much on the American side, want China to begin buying agriculture goods and products as they promised,” Larry Kudlow, the director of Mr Trump’s National Economic Council, told Fox Business Network on Friday.

Both sides could agree to return to a document cobbled together this spring as a basis to proceed, said Chris Krueger of financial services company Cowen Group. “The real deal breaker, as became clear with the collapse of talks in May, is how the agreement should be enforced,” he wrote.

Choosing Shanghai for the talks signalled a willingness to reach a deal by the Chinese side. Twelve years ago, China’s then-commerce minister, Bo Xilai, met in Shanghai with Peter Mandelson, then EU trade commissioner, to seal a deal that temporarily curbed a “surge” of Chinese textile exports to the EU.

Earlier in July, the US lifted its additional tariffs on 110 Chinese-made industrial goods following appeals by American companies. Most of the lifted tariffs apply to engines, motors and equipment parts, as well as medical devices.

There has also been some movement on granting licences for companies partnering with Chinese telecoms equipment maker Huawei.

China’s state-run Xinhua news agency said on July 19 that Chinese companies had resumed buying US soyabeans, cotton, pork and sorghum, adding that it would continue to do so if prices were appropriate. Agricultural purchases by Chinese companies had slackened after a deal to end the trade war fell apart in early May.

But Mr Trump appeared to dispute that there was any progress on that front.

“China is doing very badly, worst year in 27 — was supposed to start buying our agricultural product now — no signs that they are doing so,” Mr Trump wrote on Tuesday.

Any attempt by US negotiators to pin down grain purchase commitments is complicated by the fact that Chinese agricultural imports are unlikely to return to previous levels. The country is still digesting a massive build-up in state grain stockpiles in the years before 2016, which raised Chinese prices well above global levels and artificially inflated import demand.

In the short term, Chinese demand is further weakened by an epidemic of African swine fever that has decimated the country’s pig herd, reducing demand for feed.

The drop in Chinese grains purchases as it unwound its excess state grains reserves contributed to the wave of anti-China feeling that swept the US around the time of Mr Trump’s election. That has given soyabeans centre stage in the talks, even though most of the White House’s tariffs are designed to counter industrial offshoring.

Chinese grains importers are wary of the consequences of setting minimum grains purchase volumes as part of any trade deal. They worry that could leave them forced to purchase American grains at inflated prices.

Lucy Hornby in Beijing and James Politi in Washington

Additional reporting by Xinning Liu and Archie Zhang in Beijing