US-China trade talks: What’s at stake?

  • 7 Jan 2019

While the talks are being held between second-rung bureaucrats, its outcome could define the course of trade relations between the world’s two largest economies.

Deputy US trade representative Jeffrey D. Gerrish, center, is in Beijing where he's leading an official delegation to hold trade talks with Chinese counterparts. ( AP )

As the two-day trade talks between the United States and China kick off in Beijing, businesses and investors in both countries are pinning hopes on a favourable outcome that could boost their sagging economies. 

A US delegation led by Jeffrey Gerrish, a deputy trade representative, is meeting its Chinese counterpart on Monday and Tuesday in what is being seen as a huddle to prepare ground for more concrete talks between senior leaders at a later date. 

Yet, economic and financial stress in the world’s two leading markets has put the spotlight on the ministerial-level talks.

Experts have underscored the urgency in finding a way out of the lingering trade dispute which saw both sides hit each other with tariffs last year.

This latest meeting follows a truce struck by US President Donald Trump and his Chinese counterpart Xi Jinping on December 1. As per that agreement, both sides will refrain from using more tariffs until early March. 

No one’s gain

In times in which integrated global supply chains and cross-border investments are all too common, the fallout from the trade war hit home last week when iPhone maker Apple reported a gloomy sales outlook. 

The American tech giant said it slashed its quarterly forecast for the first time in 15 years as sales in China, the world’s largest market for smartphones, cooled. 

The news was enough to send US stocks sliding and raise concerns about a general drop in demand for other products.

President Donald Trump met China's President Xi Jinping during their bilateral meeting at the G20 Summit, in Buenos Aires, Argentina, in December and agreed to give negotiations a chance.(AP)

Besides the financial implications, the trade dispute has also hit companies that source parts and components from China and then target Chinese consumers with the final product. 

American electric car maker Tesla is one example. Its Model S and Model X cars, built in California, depend on Chinese components. The cars are then shipped to China. Additional tariffs had negatively impacted its business. 

A slowdown in China perpetuated by the trade dispute could spell trouble for more companies in the US, especially in the high-stakes technology sector. 

Semiconductor makers such as Qualcomm and Intel could see a decline in exports to China. 

The US has put forward a host of demands for China to fulfill. 

It wants Beijing make it easier for American farm products to be imported, to remove trade barriers, stop subsidising Chinese firms, and provide a level playing field to foreign firms. 

One product, US soybeans, which Chinese farmers use as feed for pigs and poultry, has taken a particular hit because of the dispute. 

In retaliation for taxes on its exports, China cut the importation of US soybeans, which dropped to 341,000 tonnes between September 1 and mid December, 2018, compared with 18 million tonnes in same period of the previous year. 

A hawk or a dove?

Head of the US delegation, Gerrish, is close to Robert Lighthizer, Washington's top trade representative, who has advocated for a firm US stance against China. 

In the 1990s, as a US deputy trade representative, Lighthizer opposed China’s entry into the World Trade Organisation. 

At his confirmation hearing, Gerrish spoke about his upbringing in Troy, New York, which lost its status as a steel and textile manufacturing hub due to competition from imports, and how it has shaped his views. 

The US delegation also includes officials from treasury and agriculture departments, including Gregg Doud, the chief US agricultural negotiator, whose family owns a farm that produces soybeans. 

Since the Trump-Jinping meeting, China has taken steps to ease pressure on US imports such as rolling back additional tariffs on US cars.