China and the US have restarted formal trade talks, but that doesn't mean the trade war will end anytime soon

President Donald Trump with Chinese President Xi Jinping in Hamburg, Germany, during the plenary session at last year's G20 summit.

source

Mikhail Svetlov/Getty Images

Trump administration officials held a call with their Chinese
counterparts on Tuesday, formally kicking off the latest round of
talks to end the US-China trade war.

China's repeated commitment to buying US products and
lowering auto tariffs shows that Beijing is at least
superficially committed to easing the trade tensions.

But the arrest of Huawei CFO Meng Wanzhou and the Trump
administration's actions to confront China in other areas could
cast a shadow over the talks.

Just over a week after President Donald Trump and Chinese
President Xi Jinping reached a temporary truce, the two sides are
showing signs of progress in talks to end their trade war.

Ad

"Very productive conversations going on with China!" Trump
tweeted Tuesday. "Watch for some important announcements!"

But while encouraging signs seem to show China's dedication to
the détente, worrying signs remain that the trade war won't end
anytime soon.

"Nearly every factual data point since the G-20 has been a
net-negative on the US-China conflict - except for the Tweets,"
said Chris Krueger, an analyst at Cowen Washington Research
Group.

Ad

Talks restart

Capitalizing on the goodwill from Trump and Xi's dinner at the
G20 summit earlier this month, US Trade Representative Robert
Lighthizer and Treasury Secretary Steven Mnuchin held a call with
Chinese Vice Premier Liu He, the country's top economic official,
on Tuesday.

According to a statement from China's Ministry of Commerce, the
two sides discussed next steps for implementation of the
agreement reached at the G20 summit. Topics included China's
promised purchases of US agricultural goods and changes to the
country's economic practices,
according to reports.

The call represented the first formal discussion since Trump
announced a 90-day truce that would delay an increase of US
tariffs on $200 billion worth of Chinese goods.

caption

Trump and Xi along with members of their delegations during a dinner meeting in Buenos Aires, Argentina, at the end of this year's G20 summit.

source

SAUL LOEB/AFP/Getty Images

But most analysts consider it nearly impossible for the two sides
to reach an agreement that includes the fundamental changes the
US is seeking from China during such a short negotiating window.

"We doubt that a comprehensive agreement can emerge in the next
three months, which suggests that trade tensions will resurface
in earnest early next year," Isaac Boltansky, a policy analyst at
the research and trading firm Compass Point, wrote Monday.

While Trump and Larry Kudlow - the staunchest free-trade advocate
on Trump's team - suggested that window could be extended, the
man in charge of the talks has shut down the suggestion. In an
interview with CBS' "Face the Nation" on Sunday, Lighthizer
called the 90-day window a "hard deadline."

"When I talked to the president of the United States, he's not
talking about going beyond March," he said. "He's talking about
getting a deal. If there is a deal to be gotten, we want to get
it in the next 90 days."

Is China making moves?

The Chinese are also trying to show their commitment to the talks
by moving forward with some of the agreed-upon steps from the
Trump-Xi meeting:

According to reports, China is preparing to start purchases
of American agricultural and energy goods in the coming weeks.

But while the Chinese have talked up the desire to move forward
with these procedures, it's unclear whether those intentions have
translated into actual business for American farmers and firms.
Major US farm groups have
yet to see any purchases of their goods from China, and
analysts say there is
no data to show that Chinese purchases have resumed.

Trying to keep Huawei, bigger economic concerns separate

Complicating the talks is Canada's arrest of Meng Wanzhou, the
CFO of the Chinese tech giant Huawei, at the direction of the US.
While Meng's extradition is pending,
investors and analysts were concerned that the arrest could
throw the trade talks into flux.

Since the arrest, US and Chinese officials have insisted that
Meng's status will not interfere with the outcome of the talks.

"It is totally separate from anything that I work on or anything
that the trade policy people in the administration work on,"
Lighthizer told CBS. "So, for us, it's unrelated, it's criminal
justice."

caption

Meng Wanzhou, the CFO of Huawei.

source

REUTERS/Alexander Bibik

Chinese state media outlets have largely directed ire for the
arrest at Canada and
have also separated the trade talks from Meng's arrest.

But casting another shadow is a reported administration-wide
effort to call out China for stealing American technology and
trade secrets.
According to The Washington Post, multiple agencies across
the US government will condemn China over such practices.

The developments follow a concerted campaign from the Trump
administration to confront China over allegations of
intellectual-property theft, economic espionage, forced
partnerships between US and Chinese firms, and other
noncompetitive policies.

But while officials are attempting to keep Meng's arrest and the
broader US campaign to confront China out of the trade talks, the
separation may prove difficult.

Krueger said the US could cut a deal to stop pursuing the
extradition of Meng while negotiations are productive -
implicitly allowing the arrest to infiltrate the talks - or allow
the current state of affairs to continue.

"The default scenario now is a multi-month (or year?) extradition
process in Canada with the Huawei CFO in limbo and the Chinese
very angry and increasingly pressured to respond by domestic
forces," Krueger wrote in a note to clients. "Of course in this
case, it means the Huawei complaint is intimately intertwined
with the politics and talks...regardless, an incredibly poor
catalyst for the talks to open on."