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Trade war, day 69: More talks proposed, but no signs of structural change

The U.S. Treasury Department, led by Steven Mnuchin, is again attempting to find a deal with China on trade.

“The Trump administration is reaching out to China for a new high-level round of trade talks, in an effort to give Beijing another opportunity to address U.S. concerns before it imposes new tariffs on Chinese imports, said people briefed on the matter,” the Wall Street Journal reports(paywall).The Journal says that “President Trump has authorized Mr. Mnuchin to try to get trade talks with Beijing back on track,” and that Mnuchin is joined by chief economic adviser Larry Kudlow in his intention to find “a near-term settlement out of concerns that a protracted battle with China could batter financial markets.”But “the U.S. trade representative’s office headed by Robert Lighthizer, which is in charge of tariffs, wants to hold off on negotiations, arguing that additional levies would give the U.S. more bargaining power in the dispute.”The invitation by Mnuchin to his counterpart, Liu He, was confirmed(paywall) by Bloomberg, which noted that this would be the fifth time that Trump administration officials have formally sat down with Chinese counterparts to discuss trade.

The Journal then reported (paywall) that stocks rose in response to its report — the Dow added “170 points, or 0.6%” — including that “trade-sensitive industrial and materials stocks rallied on the latest signs that the U.S. is willing to compromise on trade.”

But the U.S. is not necessarily expressing willingness to compromise here — it is instead, in the Journal’s own words, “an effort to give Beijing another opportunity to address U.S. concerns before it imposes new tariffs on Chinese imports.”The last time that Steven Mnuchin and Liu He directly negotiated, back in May, it ended in spectacular failure, leading to deep grievances on both sides.That’s because China failed to address core American complaints about Chinese economic practices: alleged IP theft, coerced technology transfer, Chinese market protectionism, and state-heavy economic development, exemplified by the Made in China 2025 initiative.

The Made in China 2025 initiative is not slowing down, according to the South China Morning Post:

State-owned enterprises — exactly the part of China’s economy that Washington considers most suspect in conducting unfair economic practices — will feature prominently in an upcoming conference due to convene sometime in late September in Beijing, the SCMP reports.At that unnamed conference, Liu He is expected to urge SOEs to “‘make breakthroughs in key aspects’ of cutting-edge technologies and call on them to ‘take a leading role at the front’ of the country’s drive to make technological progress” — aka the Made in China 2025 initiative.

These structural factors — American brinkmanship and disunity in the Trump administration, and unchanged Chinese economic practices with regards to Made in China 2025 — seem likely to sink any further round of negotiations in the near future. For more news and analysis on the trade war, please click through to SupChina.


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