The emerging stalemate in U.S.-China trade negotiations reflects a breakdown in trust and widening differences that are unlikely to be resolved soon.
President Donald Trump on Monday again accused China of backing out of a deal that was taking shape with U.S. officials, saying Beijing reneged on an agreement to enshrine a wide range of reforms in Chinese law. That dispute grew out of an earlier deadlock over how and when to remove existing American tariffs that provoked Beijing to threaten quit the talks, people briefed on the discussions said.
“I say openly to President Xi & all of my many friends in China that China will be hurt very badly if you don’t make a deal because companies will be forced to leave China for other countries,” Trump wrote on Twitter. “You had a great deal, almost completed, & you backed out!”
Both the U.S. and China had tried to project calm since the latest round of discussions ended on Friday and said that they plan to continue negotiations in the hopes of avoiding a tumble in markets and broader economic damage. But that facade masks fundamental divisions, with U.S. officials increasingly convinced that hardliners in Beijing are winning the internal debate on reforms.
As China considers how to respond to higher U.S. tariffs, Trump suggested that China would only be harming its own economy if the country responds with more punitive measures on American products. “China should not retaliate — will only get worse!” he tweeted.
Meantime, Chinese state media blamed the U.S. for the impasse and talked up its economic resilience, with the People’s Daily saying in a front-page commentary that the U.S. should take full responsibility for the setbacks because it went back on its word and imposed more levies.
The ongoing uncertainty means more turmoil for financial markets: Stocks in Asia fell along with U.S. and European equity futures, the yuan and Treasury yields.
The latest breakdown has prompted an escalation in the tariff war between the world’s two largest economies that looks increasingly like the International Monetary Fund and others’ worst-case scenario for a global economy already forecast to grow this year at its slowest rate since the immediate aftermath of the 2008 financial crisis.
On Monday, U.S. officials are expected to announce details of their plans to impose a 25% additional tariff on all remaining imports from China — some $300 billion in trade. Beijing is still working on its own retaliations to last week move by Trump to impose a 25% punitive tariff on more than 5,700 products worth some $200 billion annually.
Larry Kudlow, Trump’s top economic adviser, said on Sunday that no further talks had been scheduled, though he raised the possibility that Trump and President Xi Jinping will meet on the sidelines of a Group of 20 summit in Japan at the end of June.
In an interview with Fox News, Kudlow played down the economic impact of an escalation of tariffs by both sides, while conceding that economists and businesses were right when they challenged Trump’s assertion that China was paying the cost of the tariffs.