“A single sunbeam is enough to drive away many shadows.”
– Francis of Assisi
US and Chinese negotiators met in Shanghai recently to resurrect trade talks between the world’s two biggest economies, with both sides downplaying expectations there will be an imminent deal. The negotiations in China’s financial hub were the first face-to-face discussions since negotiations collapsed in May, when US President Donald Trump accused China of reneging on its commitments. Washington and Beijing have so far hit each other with punitive tariffs covering more than $360 billion in two-way trade, in a tense stand-off centred on demands for China to curb the alleged theft of American technology and provide a level-playing field to US companies. The two days of talks are to be led on the US side by trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. The negotiations come as Beijing faces heavy pressure over ongoing civil unrest in Hong Kong, and with lingering ill-feeling between the US and China. Days before the Shanghai meeting, Trump threatened to pull recognition of China’s developing nation status at the World Trade Organization – prompting an irritable reply from Beijing about the “arrogance and selfishness” of the US, which state media said was using pressure ahead of the trade talks. The US leader has also angered the Chinese side by claiming the slowing economy is forcing them to make a trade deal, and blacklisting telecom giant Huawei over national security concerns.
But the kick-starting of trade negotiations is being seen as positive – even if little of substance is expected – following a truce agreed between Trump and Chinese president Xi Jinping at the G20 in June. Realistically, this round of talks is about clarifying where the two sides stand after a significant lull in engagement,” said Jake Parker, senior vice president at the US-China Business Council. There also needs to be a focus on rebuilding trust that was present in April but has since dissipated. Holding talks in Shanghai is also a nod to a time of better relations, as the home of the 1972 Shanghai Communique – an important step in building diplomatic relations between the US and China. Vice Premier Liu He will likely lead the talks for China again, with the addition of Chinese Commerce Minister Zhong Shan, seen as a tougher negotiator.
Yet both sides were busy lowering expectations in the run-up to talks. Mnuchin while talking to Chinese state-run daily said that recently there were still “a lot of issues”. It is widely believed that trade talks will take a long time. There are likely to be modest soft-pedalled concessions, managing partner at Vanguard Markets Singapore, such as new Chinese purchases of US agricultural products or a pause of further tariff increases on Chinese exports to the US. Following another month of escalating tensions, agreement on practically anything will be a positive.