Giddy up. Two days of intense trade discussions begin today in the Eisenhower building led by U.S. Trade Representative Robert Lighthizer and his Chinese counterpart Vice Premier Liu He. The stakes are high as the deadline for an agreement is March 2nd.
Ambassador Lighthizer is joined by Commerce Secretary Wilbur Ross, Treasury Secretary Steven Mnuchin, and China’s arch nemesis, White House trade advisor Peter Navarro.
Adding to the intensity, the United States just charged Chinese telecommunications company Huawei Technologies and its chief financial officer, Meng Wanzhou, with conspiring to violate U.S. sanctions on Iran by doing business through a subsidiary. Ms. Meng was arrested in Canada at the request of the United States; her extradition has been requested by the Department of Justice.
President Trump has made sure the Chinese are aware the status quo cannot stand. Additionally, USTR Lighthizer has previously affirmed that significant, substantive and deliverable progress must be made to avoid pending tariff increases.
This is the first time China has faced such significant and openly hostile push-back within a trade discussion. To say the talks are tense would be a massive understatement. President Trump wants a deal; however, Trump, Lighthizer, Ross and Mnuchin have already put the consequences for failure in the middle of the table.
China knows what will happen on March 2nd, if they do not negotiate in full faith.
Beijing has provided little indication these current officials are willing to address the core U.S. demands to fully protect American intellectual property rights and end policies that Washington has said force U.S. companies to transfer technology to Chinese firms. Thus the severity of the two-day talks takes on a very confrontational tone.
Additionally the U.S. Team have previously accused China of cyber theft and illicit acquisition of U.S. technological trade secrets. China’s prior acquisition of U.S. technology firms is the basis for President Trump to leverage pending U.S. tariffs on $250 billion worth of Chinese imports.
If an agreement is not reached President Trump will raise tariffs on $200 billion of goods from 10 percent to 25 percent, effective with the March 2nd deadline. The U.S. administration has also threatened new tariffs on the totality of all remaining Chinese products shipped to the United States.
Initially China retaliated with their own tariffs; however, following the dinner between Chairman Xi and President Trump China suspended some of their reciprocal tariffs on U.S. agriculture.
Lastly, President Trump has blunted the traditional leverage of the Red Dragon by agreeing to meet with North Korea Chairman Kim Jong-un. Not coincidentally the timing for that summit intersects with the deadline for the U.S-China trade deal.
When you plant your trees in another man’s orchard, don’t be surprised if you end up paying for your own apples…