Hopes for a Deal Are Low as U.S.-China Trade Talks Resume
U.S. President Donald Trump, left, walks with Xi Jinping, China’s president, during a welcome ceremony outside the Great Hall of the People in Beijing, China. (Photographer: Qilai Shen/Bloomberg)

Hopes for a Deal Are Low as U.S.-China Trade Talks Resume

(Bloomberg) -- China and the U.S. are talking trade again this week, but the two sides are arguably further apart than they were three months ago, when negotiations broke down and each side blamed the other for derailing attempts to reach a deal.

Talks are scheduled to restart Tuesday in Shanghai after last month’s truce between President Donald Trump and his counterpart Xi Jinping. But deep divisions remain.

Since the initial tariffs in June last year, both Washington and Beijing have further raised and expanded the duties. The conflict between the world’s two largest economies has also metastasized, dragging in companies such as Huawei Technologies Co. and FedEx Corp., farmers in the Midwest, factory workers across Asia, and even the World Trade Organization.

The U.S. now charges 25% tariffs on $250 billion in Chinese imports. Including earlier actions to protect things like domestically produced washing machines and solar panels, more than half of American imports from China were subject to trade protection at the end of 2018, up from just 8% a year earlier, according to Chad Bown at the Peterson Institute for International Economics.

China has almost doubled its initial broadside, with tariffs now on $110 billion in imports from the U.S., more than 70% of the value of the value of goods it bought from the U.S. last year. Combined, those actions have substantially changed trade between the two nations.

Hopes for a Deal Are Low as U.S.-China Trade Talks Resume

And while not the only factor, the trade war is having a chilling effect on trade with other nations, too.

Hopes for a Deal Are Low as U.S.-China Trade Talks Resume

Energy Effects

The effect of the conflict hasn’t only been felt in the goods trade. The ongoing trade war has scuttled a blossoming natural-gas partnership between the U.S., vying to become one of the world’s biggest exporters of liquefied natural gas, and China, which is poised to become the biggest buyer.

Chinese LNG Buyer Swears Off American Gas on Trade War and Glut

Hopes for a Deal Are Low as U.S.-China Trade Talks Resume

Tariffs have altered the immediate trade flows, and the dispute could threaten the viability of a new wave of U.S. LNG projects. Chinese companies are unlikely to sign deals with companies -- including NextDecade Corp. and Tellurian Inc. -- seeking billions of dollars worth of investment while the sanctions are in place.

Since the outbreak of tariffs in mid-2018, the trade in oil between the two nations has plummeted on concerns that the commodity could be targeted for higher import taxes. Flows from the U.S. to China were zero in four of the six months from October 2018 to March 2019, a stark contrast to record volumes of more than 2 million tons in January last year.

Agriculture

U.S. soybean exports to China, the world’s biggest market, slumped in the first half to the lowest level in more than a decade while pork sales in June slipped from a month earlier as little progress was made on ending the trade war.

There’s signs that China has resumed purchasing agricultural goods as what state media called a “show of goodwill” to the U.S., but if talks stall or collapse again, that could stop as suddenly as it started. That’s a daunting prospect for U.S. farmers approaching the second harvest season during which tariffs are threatening their livelihoods.

©2019 Bloomberg L.P.

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