In a major escalation in the deteriorating US-China relationship, China has promised to battle “until the end” in the escalating trade war. Unfortunately, at the same time, the country is crying out for a willingness to dialogue. The Chinese government, while not retracting its firm stance, has softened its rhetoric amidst emerging signs of a possible thaw in trade relations. Even so, the way ahead is still teeming with obstacles — especially when it comes to the asks each country has laid out.
Most recently, China’s Commerce Ministry affirmed that the United States has secretly signaled its own willingness to negotiate in backdoor channels. Tensions due to trade tariffs have reached a boiling point. Yet in response, China is now insisting on “sincerity” from the US. In particular, Beijing is insisting on Washington dropping the 145% tariffs as a precondition before serious negotiations can start.
The new export opportunities are born of a new era of cautionary optimism on both sides of the Atlantic. China’s newfound openness to reconsidering the potential for restarting negotiations is a sign that China’s approach is changing. The US continues to insist that the ball is now in China’s court when it comes to continuing talks. The White House has so far refused to entertain up-front canceling of duties, which continues to be the BIG T critical path log jam in negotiations.
Amid these developments, concerns linger over Marco Rubio’s new dual role overseeing state and national security following Donald Trump’s surprise reshuffle. Beijing is looking at this change with extreme wariness, seeing in it an early sign of a US hardening of policy against China. Rubio’s new role would make delicate negotiations much more difficult. That’s particularly the case if more hawkish rhetoric starts to flow with respect to Taiwan or the South China Sea.
Both countries seem to be holding up détente flags while having entirely different understandings of what those flags symbolize. While China seeks genuine dialogue and the removal of tariffs as a precursor to negotiations, the US continues to signal that it will not compromise on existing duties without a compelling reason.
The macroeconomic data stand to be even more important for the upcoming release. In particular, the next US payroll numbers will have a huge impact on the direction of these negotiations. If the data impresses or at least exceeds expectations, that may help set a positive tenor for those discussions. In the opposite direction, negative economic news could be an early warning of a failure in communications.
“We will fight to the end.” – Chinese officials