What Happens if Trade Talks with China Fall Apart

Op-ed in The New York Times

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The following is the full text of ASPI Vice President Wendy Cutler's op-ed in The New York Times.

Trade talks between the United States and China appear to be in serious trouble after China reportedly walked back some of its commitments and President Trump launched a tirade against Chinese negotiators on social media. This marks a sharp turn from last week, when Mr. Trump said talks were “going along pretty well.” As with most negotiations, the most intractable issues have been left for the final stages.

But this round of trade talks, which are to resume on Thursday, is different from those that have come before. If these negotiations fail, there is no going back to the status quo and waiting for another day to re-engage. Further tariff increases and other punitive measures, from both the United States and China, are likely to follow with little restraint.

Among the most difficult questions still on the table are the so-called structural issues that are at the core of the Chinese economic model. These include subsidies and other financial assistance provided to state-owned businesses, which make them unfair competitors. So far, China has reportedly agreed to more transparency on subsidies, an important first step, but there has not been enough progress on controlling them. Mr. Trump will need more than that to placate his political base. The president of the A.F.L.-C.I.O., Richard Trumka, has already warned, in a recent interview with The Financial Times, that he will consider any deal that fails to reduce industrial subsidies “inferior.”

Even if they can address the structural issues, the United States and China must still decide how the deal would be enforced. In particular, they have not agreed on whether tariffs could be reimposed if violations occur. The United States is demanding that it retain the right to use unilateral tariffs, while China gives up its right to retaliate. That is a tough sell politically for Beijing, and so far neither side appears to be budging.

Finally, the two sides have not yet agreed on what to do with the $360 billion in tariffs in place — specifically, whether to remove some or all of them.

Read the full article on The New York Times.

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