A stalemate in the US–China trade negotiations: the tariff war and technology sanctions. OSW Commentary Number 303, 28 May 2019

Jakóbowski, Jakub and Bogusz, Michał (2019) A stalemate in the US–China trade negotiations: the tariff war and technology sanctions. OSW Commentary Number 303, 28 May 2019. [Policy Paper]

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Abstract

The first fortnight of May 2019 saw a major escalation in the Chinese–American trade dispute, in which additional tariffs on around 40% of bilateral trade were imposed and the US introduced an embargo on the Chinese technology company, Huawei. This new phase in the economic conflict between China and the US ends the five month long period of relative de-escalation and intensive negotiations on a framework trade agreement, initiated during the meeting in December 2018 between Donald Trump and Xi Jinping at the G20 summit in Buenos Aires. Unlike during the previous breakdown in the negotiations in May 2018, which resulted in a freeze on contacts, both sides have announced their willingness to continue the dialogue on the trade deal. However, continued escalation of the dispute (for example, over Huawei) is leading to a gradual sharpening of both sides’ rhetoric and a toughening of their stances as regards the conditions for recommencing the talks. The present phase of the conflict has revealed deep discrepancies in issues of fundamental importance for the future of the negotiated deal, including the mechanisms for ensuring its enforcement, in addition to the circumstances and dates in which the current punitive tariffs could be lifted. The prolonged stalemate in the negotiations may cause the US to resume its tactic involving a gradual stepping up of its pressure on China, which in turn will translate into a downturn in the global economic situation and Washington’s increased political pressure on its allies as regards their cooperation with China.

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