The latest round of US-China negotiations ended ahead of schedule. Following the talks in Shanghai, the sides agreed to meet in September in the US, as Bloomberg reported on Wednesday, July 31. The Chinese media emphasized that the talks were “sincere, effective and constructive” and that the sides discussed the “growth of Chinese purchases of US agricultural products.” However, US President Donald Trump said on August 1 that on September 1 the US would impose a 10 percent duty on Chinese goods worth $300 billion, writes Yana Leksyutina, PhD (Politics), Professor of the Russian Academy of Sciences and of St Petersburg State University.
The Trump-initiated US-China trade war and the negotiations to stop it have already lasted between the world’s largest economic powers for over a year. During this time, US and Chinese officials have repeatedly said that they had reached tangible results at the talks and were about to find a mutually acceptable formula for ending the trade war. The US President has expressed his willingness to weaken pressure on China and to suspend the introduction of new tariffs on Chinese imports at least twice – during his meeting with Xi Jinping on the sidelines of the G20 summits in Buenos Aires in December 2018 and in Osaka in June 2019. However, when the impact of the personal meetings with the Chinese President wore off, Trump resumed his bellicose rhetoric on China’s trade and economic policy and initiated new protectionist measures.
The US and China cannot put an end to their trade war because their positions are irreconcilable. Trump insists that China needs to reduce its imbalance in trade with the US, stop state subsidies to manufacturers, remove restrictions on foreign investment in the country, lower import duties to US levels, lift non-tariff barriers, and facilitate access of US services providers and agricultural producers to Chinese markets. China is showing a willingness to increase the import of US products (agriculture and energy resources) and offer other concessions to Trump, but Beijing will still avoid drastically changing its trade and economic policy or expediting the liberalization of its trade regime and its conversion to a market economy in order to please Washington. China is also reluctant to give up the preferences it enjoys in international trade as a developing nation.
Neither the US, nor China intends to make major concessions in trade and the economy. Moreover, Beijing is convinced of its ability to win a trade war with the US while sustaining moderate losses. Now China is feigning negotiations in the hope of winning time and reducing the intensity of the economic pressure until the presidential election in the US next year. A new president (if that’s the result) could lead to changes in US trade and economic policy towards China.
In the meantime, Chinese economists continue to analyze the potential moves of the Trump administration on exerting economic pressure on China and are preparing alternatives for hedging the risks and threats to its economic development. To minimize the impact of the trade war on its economy and people’s living standards, China announced a reduction in taxes on businesses and population in March 2019. Since economic dependence in US-China trade is reciprocal and China has considerable economic and financial power, it can take measures to restrict the negative effect of US protectionist measures on its exporters and exert pressure on Washington. China can manipulate the exchange rate of its national currency, refuse to import some American goods and raw materials, close its services market to US companies or decrease the purchase of US treasury bonds.
Although the trade war with the US is hurting China, it is not a threat the Chinese can’t deal with. The logic and course of its talks with the US and Beijing’s actions show that China is not afraid of a trade war with the US. China has much more serious apprehensions about the potential US use of non-economic approaches to weakening China and its current authorities. The most serious problems that China faces and which could be used by Washington to destabilize China include protests in Hong Kong, the international campaign to protect the rights of the Uyghurs in China’s Xinjiang Uyghur Autonomous Region (XUAR), and the Taiwan issue. Beijing is not afraid of the trade war with the US as a manifestation of commercial and trade differences between the two countries. It is worried about a comprehensive US policy of containing China, a policy that not only implies economic restrictions but also political and military consequences, an exacerbation of structural and systemic differences with the US, and the geopolitical confrontation for global leadership. For now, there are no clear signs of these tactics in US-China relations for the mid-term, but Beijing’s deep apprehensions over this are growing.
The current and future development of US-China relations is bound to be followed closely by Russia for which the ongoing trade war contains both risks and opportunities. An escalation in tensions over US-China trade disputes increases the turbulence in the world economic environment and could have a negative impact on the global economy and the dynamics of the emerging economies, as well as on the raw materials, commodities and agriculture markets. A deepening trade divide between the US and China could even undermine the international trade and economic system with all the negative consequences this implies. However, the US-China trade war may also have positive results for Russia. China now views Russia as a very important strategic partner; the development of Russian-Chinese trade, economic and financial cooperation has received a powerful impetus; the Chinese market is gradually opening to an increasing range of Russian goods as Russian businesses received more favorable opportunities for entering the Chinese market.
