China-US trade war de-escalates but obstacles remain
The agreement reached in Geneva calls for a 90-day pause to record duties and counter-tariffs that took effect on 2 April, unsustainable for both economies. Now the real negotiations can begin, which, however, must deal with political “red lines”.
Geneva (AsiaNews) – Some 40 days after the start of the escalation, Washington and Beijing have given the first real sign of cooling the trade war following two days of negotiations in Geneva.
The announcement came this morning in a joint statement. The agreement reached by the two parties provides for the United States and China to put on hold for 90 days, starting Wednesday, all duties and counter-tariffs that came into effect on 2 April.
Under the terms of the deal, US tariffs on Chinese imports will drop to 30 per cent, while Chinese tariffs on US imports will be cut to 10 per cent.
The US measures still includes an extra 20 per cent aimed at pressuring Beijing to do more to stop the illegal trade in fentanyl, a powerful opioid drug.
The agreement does not, however, cover shipments from China valued at under US$ 800, which particularly affects China’s e-commerce giants.
The tariffs – 145 per cent on Chinese exports to the United States, and 125 per cent on US exports to China – risked crashing trade between the two countries, with US ports already reporting a sharp drop in the number of ships arriving from China.
In China, production in factories had already slowed down with reports of layoffs, while production lines for goods destined for the United States are starting to shutter.
In announcing the deal, US Treasury Secretary Scott Bessent said that “neither side wants a decoupling”. Instead, “we want more balanced trade, and I think that both sides are committed to achieving that.”
For its part, the Chinese Ministry of Commerce said that the agreement reached with the United States is an important step to “resolve differences” and “lay the foundation to bridge differences and deepen co-operation”.
The deal made in Geneva is only a starting point for negotiations between Washington and Beijing. Both sides have, in fact, political red lines that will not be easy to cross.
The United States is asking China to abandon its own economic model, boost domestic consumption, open markets, and reduce the advantages of state-owned enterprises.
China has countered by saying that this is interference in its internal affairs. Instead, it wants the United States to clearly specify the list of goods it hopes to increase exports to China.
Beijing could pledge to increase imports of agricultural and energy products from the United States in the short term in exchange for tariff reductions.
It might be willing to establish a fentanyl control dialogue group as a gesture to domestic political needs of the United States. More generally, a two-track negotiation mechanism could be set up to separate technical and political issues.
Nevertheless, three factors will continue to have a big impact. First, decoupling remains a strategic goal for Washington as it tries to reduce dependence on China in supply chains and block technology transfer. This is now beyond the slogan phase, and calls for concrete actions.
For its part, China is redefining its trade policy, strengthening its exports to ASEAN countries and stimulating domestic consumption. Although these policies will not substantially replace trade with the United States, they are aimed at limiting its scope.
Finally, Washington and Beijing are at loggerheads over several political issues, starting with the Taiwan Strait and more generally the South China Sea to human rights (just a few days ago President Trump evoked the possibility of including the case of Jimmy Lai in Hong Kong in this type of negotiation). All this could see the trade war flare up at any time.
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21/06/2018 10:23
10/01/2019 14:00
