The Chinese Commerce Ministry announced on Aug. 16 that a delegation would travel to the United States, at the invitation of the Treasury Department, to resume talks in hopes of ending the tit-for-tat dispute.
The S&P 500 index on Aug. 16 gained 0.8 percent and the Dow Jones Industrial Average rose 1.6 percent, concluding one of the best trading days in four months. Walmart’s strong earnings contributed to the rally. European markets also closed higher following the news. The UK’s main stock benchmark FTSE 100 ended the day 0.9 percent higher.
The last round of discussions between the two sides took place in early June in Beijing. Since then, trade tensions have escalated, as both sides have slapped tariffs on billions of dollars of goods.
White House economic adviser Larry Kudlow confirmed that U.S. and Chinese trade officials would meet later this month.
“The Chinese government, in its totality, must not underestimate President Trump’s toughness and willingness to continue this battle to eliminate tariffs and nontariff barriers and quotas, to stop the theft of intellectual property and to stop the forced transfer of technology,” Kudlow told CNBC. “Those are the asks that we’ve been making now for quite some time.”
The meeting will be held at a lower level than previous talks, which were led by Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He; this time, Treasury Undersecretary David Malpass will meet with Vice Minister of Commerce Wang Shouwen.
A day before the announcement of the talks, Trump wrote on Twitter: “Our Country was built on Tariffs, and Tariffs are now leading us to great new Trade Deals—as opposed to the horrible and unfair Trade Deals that I inherited as your President. Other Countries should not be allowed to come in and steal the wealth of our great U.S.A. No longer!”
Economic analyst Qin Peng said he’s not optimistic about the upcoming talks. He said the Trump administration wants China to change its predatory economic behavior but the communist regime isn’t willing to make concessions.
“However, this talk is not 100 percent meaningless,” he said.
The lower-level talks would give the Chinese decision-makers some buffer room, allowing them to observe the reactions within China, he explained.
The Chinese leaders don’t want to be called “traitors” by some interest groups in the country who are against a softer stance in the talks, according to Qin.
“So in a sense, Chinese leaders are using these low-level talks to test the waters.”
Trade War Hits Chinese Stocks
The trade wars have been a boon for U.S. stocks in recent months. Wall Street has substantially outperformed foreign markets since May, when the trade tensions began to heat up.
U.S. stocks have risen 6.4 percent year-to-date, while foreign stocks tumbled 6.6 percent, according to The Wall Street Journal.
The trade war has affected China’s stock markets and currency as well. The Shanghai Composite Index has lost one-quarter of its value from highs this year.
“Tariffs are working far better than anyone ever anticipated,” Trump tweeted on Aug. 4.
“China market has dropped 27% in last 4 months, and they are talking to us,” he continued. “Our market is stronger than ever and will go up dramatically when these horrible Trade Deals are successfully renegotiated. America First.”
Trade tensions between China and the United States have risen over the past few months as each side has retaliated against the other with additional tariffs. According to the Trump administration, China has shown no sign of changing course, and U.S. Trade Representative Robert Lighthizer said the trade dispute may “take time” to resolve.
Washington is considering boosting tariffs on $200 billion worth of goods imported from China to 25 percent, up from the 10 percent announced in early July. Lighthizer is scheduled to hold public hearings on the $200 billion in tariffs, starting Aug. 20.
The Trump administration believes that Washington has the upper hand in trade wars and Beijing will become more willing to make concessions as the additional tariffs kick in.
Economist He Jiangbing says the Chinese regime is in a difficult situation.
“If the trade dispute cannot be resolved within the next two months, the Chinese economy could start collapsing,” He told the Hong Kong-based Apple Daily.
The economist said Vice Premier Liu He, who is the regime figure responsible for trade, should be given more discretion during the negotiations to bar unnecessary interference from incompetent experts and populists.
The Trump administration has imposed tariffs to tackle decades-old predatory practices of the Chinese communist regime. The U.S. tariffs have targeted mainly Chinese technology products that benefit from state-backed industrial policies.
The Chinese regime has resorted to various tactics to realize its economic ambitions, including the theft of intellectual property, forcing technology transfers, subsidizing and dumping products in order to dominate markets, manipulating currency to give Chinese goods a competitive advantage, and acquiring foreign companies to obtain sensitive technologies.