China will ‘not flinch’ in face of US pressure, chief negotiator says as talks end

'This is life and death for the entire international trading system'

Liu He leaves meetings at the US Trade Representative offices on Friday (Chip Somodevilla/Getty Images)

China will not flinch in the face of American pressure to agree to a trade deal, Beijing’s chief negotiator said on Saturday after the latest round of talks ended without agreement and higher tariffs were imposed on Chinese exports.

Liu He, China’s vice premier, tried to strike a resolute but relatively conciliatory note as he left Washington following the end of the fractious talks.

“It is like a marathon. The last phase can be the hardest,” Mr Liu told Hong Kong-based Phoenix TV after the trade talks.

“To sit out the dark before the dawn, we have to hang in there, and we hope we get the understanding and support of all aspects.”

China was firmly opposed to a trade war but would keep a cool head while trying to resolve it, he said.

“China is not flinching, and nor are the Chinese people.”

Mr Liu arrived in Washington on Thursday for talks just a few hours before the Trump administration increased tariffs on $200bn (£153bn) of Chinese goods from 10 per cent to 25 per cent.

Talks on Thursday night and Friday failed to break the deadlock over President Donald Trump’s insistence that Beijing agree to make structural reforms to its economy in additional to buying more American goods to redress the trade imbalance between the world’s two biggest economies.

Two-way trade between the countries totals more than $660bn (£570bn) a year, but most of that is Chinese exports to the US.

China ran a trade surplus of close to $420bn (£323bn) with the US last year.

The two sides appeared close to reaching an agreement last month, with Mr Trump saying they were on the brink of an “epic” deal.

But that spectacularly fell through after meetings in Beijing two weeks ago, after which Mr Trump accused China of reneging on its agreements and threatened to increase the tariffs he had imposed last year in an effort to show Beijing he was serious.

President Trump made good on that threat at 12:01am on Friday, Washington time.

China responded two minutes later saying it had no choice but to take “countermeasures”.

But the authorities in Beijing have not released any details, leading analysts to think they are biding their time in the hope an agreement can be reached before the tariffs kick in.

The tariffs do not apply to goods in transit, only to those shipped after the tariffs were increased.

That gives the two sides about two weeks before ships leaving China arrive on the United States’ west coast.

Treasury Secretary Steven Mnuchin pronounced the latest discussions “constructive” but did not provide any further details.

Mr Liu said China wanted the US to roll back the new tariffs.

“China believes that it was the tariffs that started all the trade frictions, and in order for us to reach an agreement, all [punitive] tariffs should be retracted,” he told Phoenix.

But he also revealed that the two sides were deadlocked over both the reforms that China should carry out and the amount of additional American products China should be buying to narrow their trade imbalance.

“On the issue of purchases, the state leaders of China and the US reached a consensus during their meeting in Argentina and had a preliminary agreement on the numbers,” Mr Liu said.

“But the two sides are now disagreeing on how big the number should be. For China, we think this is a very serious issue and cannot compromise on it easily.”

The Trump administration had also wanted China to commit to changing laws as part of its commitment to step up intellectual property protections and stop forcing American companies to share their technological secrets, accusing Beijing of trying to water down previously agreed provisions for this.

“China is not regressing or reneging; we are only addressing divergences in some of the text and we want them resolved. Therefore, we don’t think it necessary to overreact on this issue,” Mr Liu said.

Beijing authorities also tried to strike a careful note in a commentary published on Saturday, but warned that there would be no quick solution to the trade war.

“We have to realise that the ‘fighting while talking’ scenario will probably come to stay throughout the US-China trade negotiations, and we will have to adapt to that,” said the commentary carried on Taoran Notes, a social media site which Beijing has increasingly been using to manage domestic expectations on the trade war.

“The negotiation is not breaking down, instead, it is having an interlude as the two sides are unable to resolve their differences in a short time,” Taoran Notes said on Saturday.

“A major rift between the US and China is that they see ‘fairness’ differently. When one side only recognises its own demands and tries to force the other to succumb with extreme measures, disregard of ‘fairness’ of the talks, then it is not unlikely that the two countries would part on bad terms,” said the post, published after Mr Liu’s departure.

While it was possible there would be an “explosion of frictions and conflicts” between China and the US, Taoran Notes said the two countries were capable of blazing a new trail: “One that manages to keep disagreement under control while helping the two get along by giving consideration to the greatest common factor between their respective interests.”

The revived trade war could have a significant impact on the global economy, said Mei Xinyu, a researcher at the Commerce Ministry’s International Trade and Economic Cooperation Institute.

“No matter how cocky Trump is, he will run into a stone wall,” Mr Mei said. “Looking from the market situation, the tariffs Trump imposed [on Chinese goods] will eventually come through in wholesale and retail prices in the United States.”

As the world’s two largest economies, accounting for about 40% of global output, that would have long-term, knock-on effects, Mr Mei said. “This is life and death for the entire international trading system.”

Washington Post