|14 May, 2019

Beijing’s hard line bodes ill for trade peace

If the two sides can’t find common ground at the June G20 summit, things look grim

U.S. President Donald Trump, U.S. Secretary of State Mike Pompeo, U.S. President Donald Trump's national security adviser John Bolton and Chinese President Xi Jinping attend a working dinner after the G20 leaders summit in Buenos Aires, Argentina December 1, 2018.

U.S. President Donald Trump, U.S. Secretary of State Mike Pompeo, U.S. President Donald Trump's national security adviser John Bolton and Chinese President Xi Jinping attend a working dinner after the G20 leaders summit in Buenos Aires, Argentina December 1, 2018.

REUTERS/Kevin Lamarque

HONG KONG - Beijing’s hard line bodes ill for trade peace. Officials announced fresh duties on about $60 billion of U.S. products in response to the White House’s hike last week. It’s a muscular display in the face of another potential round of American tariffs. If the two sides can’t find common ground at the June G20 summit, things look grim.

Little more than a week after U.S. President Donald Trump’s threats to hike duties on $200 billion of Chinese goods rattled markets, the results are in: it was not a mere negotiating ploy, nor was Beijing willing to give much. Vice Premier Liu He did travel to Washington rather than cancel his visit, but is said to have offered few substantive concessions during two days of talks. The tariffs are now in place, and on Monday, China announced retaliatory hikes on American imports to take effect in June. Markets in both countries have corrected in response.

Another round of escalation is now in the offing. The U.S. Trade Representative’s Office this week further detailed plans to potentially impose additional taxes on about $300 billion of Chinese imports, which are set for a relatively short public comment period. Trump continues to let loose the occasional barrage of tweets directed at China’s leadership, while state media has responded with sometimes strident defiance.

It all raises the stakes, meaning attention is turning to a meeting between Trump and Chinese President Xi Jinping at next month’s G20 summit in Japan. The run-up may be turbulent as both sides posture for a better deal, though optimists will be hoping for an outcome similar to the ceasefire brokered at last year’s G20 summit in Argentina.

If that doesn’t happen, however, the risk is that the processes slips out of control. If Trump moves rapidly forward with fresh duties – and Beijing retaliates in kind – nearly all trade passing between the world’s two biggest economies could be subject to steep levies. That prospect may be enough to nudge the two sides toward a deal. But if there’s any lesson from the past week, it’s that both sides are willing to play hardball, and investors could be the losers.

On Twitter https://twitter.com/cbeddor

CONTEXT NEWS

- China said on May 13 that it would slap higher tariffs on most U.S. imports on a revised $60 billion target list in retaliation for an American tariff increase. A total of 5,140 U.S. products will be subject to additional duties starting on June 1.

- For previous columns by the author, Reuters customers can click on BEDDOR/

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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own.)

(Editing by Pete Sweeney and Katrina Hamlin) ((christopher.beddor@thomsonreuters.com; Reuters Messaging: christopher.beddor.thomsonreuters.com@reuters.net))

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