US-China Relations Repaired? Trade War Situation Remains Dangerous

The Group of 20 industrial and emerging-market nations summit in Osaka ended yesterday. Before it even began, the whole world focused on what the leaders of the U.S. and Japan would discuss on June 29 and whether talks could revive the trade negotiations that broke down in May. When the results of the talks were known, financial markets worldwide breathed a sigh of relief. The U.S. would temporarily hold off increasing tariffs on $300 billion worth of Chinese imports, and both sides said they are willing to resume negotiations. At a press conference, President Donald Trump also stated that he would partially lift the ban preventing American companies from selling exports to Huawei.

It should be pointed out that while both sides created a harmonious setting at the summit – President Xi Jinping brought up the U.S.-China ping-pong diplomacy that occurred 48 years ago, and Trump praised the good relationship between China and the U.S. – the results of this summit’s negotiations have only left the U.S.-China trade war temporarily teetering on the edge of a cliff. There is no guarantee that the trade war will not deteriorate in the future, plunging the global economy off the edge.

First, Trump’s proposal to revive negotiations is conditional. “China is going to be buying a tremendous amount of food and agricultural product, and they’re going to start that very soon, almost immediately,” Trump said. This suggests that in the beginning stages of reopening negotiations, the punitive tariffs the U.S. imposed on China have yet to be lifted. Thus, having to buy large amounts of American agricultural products is a great concession for China.

According to Trump, China must make substantial concessions before trade negotiations can procede. On the Chinese side, the Global Times published an editorial on their website at almost 5 p.m. on June 19 entitled “Resumed Negotiations After Struggle Must Be Taken in Stride.” Basically, the editorial praised China for standing firm in the face of U.S. pressure and for then welcoming resumed negotiations. The article makes no mention of Trump’s demands for Chinese concessions. However, according to the headline’s emphasis on “taking it in stride,” China can at least quietly accept U.S. demands, enabling negotiations to proceed smoothly.

If trade negotiations resume smoothly, with China and the U.S. each interpreting them in their own way, at least the global economy can take a step back from the cliff’s edge. But if in the days to come, both sides fight over conditions for resuming negotiations, or if during negotiations, they have differences over which they cannot reach a compromise (like those that occurred this May), the global financial market will immediately be thrown into the precipice.

In fact, Trump can levy the next wave of $300 billion tariffs any time after the beginning of July. United States law provides that, before the government can impose punitive tariffs, Congress must hold a hearing to solicit opinion from all sides. Congress began this hearing on June 18, and since it is expected to take two weeks to complete, Trump can use his destructive trade measure as of July 1.

As past experience shows, Trump can behave erratically to achieve what he wants. For example, in late May during Trump’s state visit to Japan, Japan did its best to please him, even establishing a special sumo wrestling award in his name and letting him travel in Japan for four days. Yet before Trump left for the G-20 summit, he unexpectedly told the media that the U.S. was at a disadvantage in the Japan-U.S. defense treaty. Unpredictably, he threatened a defense treaty that is the foundation of Japan’s national security, putting pressure on U.S.-Japan trade talks currently underway.

In light of this, will China be willing to swallow the conditions for restarting negotiations? In the days following his trip to Japan, Trump sporadically threatened on Twitter that he could retaliate with $300 billion worth of tariffs at any time. Will China once again suffer this indignity without protest? More importantly, with the recent breakdown of negotiations in May, if neither side is willing to concede, any negotiations that are restarted will quickly break down again. Then, facing an upcoming presidential election, Trump, who mocks the Democratic candidates for being soft on China, might deal a heavy blow to China to show that he can be tough.

The author is a professor in the department of international business at the National Taichung University of Science and Technology.