Trade tensions between the US and China continue to escalate. Illustration: iStock
Trade tensions between the US and China continue to escalate. Illustration: iStock

A sketchy picture is starting to emerge on what will be on the table when trade talks between the United States and China reconvene in Washington next week.

It is understood that President Xi Jinping’s economic envoy Liu He will arrive early with a shopping list, probably on his Huawei smartphone, of American goods and products that Beijing is willing to buy.

The move is seen as a way to “avert” a trade war with Washington and stem the ballooning deficit with the US.

Earlier this week, official data showed that the trade gap expanded to US$80.4 billion in the first four months of 2018 compared to $71 billion during the same period last year. In 2017, the US deficit with China hit a record $375.2 billion.

“China likely will offer to import more US goods during negotiations as the two sides see one of the best ways to avert an all-out trade war is for Beijing to buy American,” The Wall Street Journal reported.

US delegation

“Sufficient progress was made when a senior US delegation went to Beijing last week, say the two sides, that China is dispatching Liu to Washington in the days ahead, though China hasn’t confirmed his arrival date. Liu is expected to come with a shopping list of sorts, specific ideas for purchases,” the WSJ added.

On Tuesday, President Donald Trump and Xi discussed the current state of play after last week’s high-level talks in Beijing appeared to end without any noticeable progress.

Still, Trump sounded upbeat after his call and posted on Twitter that “good things will happen” on trade.

“I attach great importance to bilateral relations, and cherish the good working relationship with Mr President,” Xi was quoted as saying on China’s state-run CCTV.

His measured comments were in stark contrast to the belligerent rhetoric from both sides in a dispute which has threatened to spiral into a full-blown trade war.

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Tit-for-tariffs on an array of products worth at least $50 billion have been rolled out by the US and China with Washington announcing it was ready to raise the ante in this high-risk game of diplomatic poker by targeting another $100 billion of imported goods.

During the Beijing discussions, the White House appeared to harden its line by demanding that the world’s second-largest economy cut the trade deficit by at least $200 billion and called for a halt to state subsidies for high-tech industries under the ‘Made in China 2025’ policy.

“Many countries, not just the United States, are disadvantaged by China’s unfair trade practices,” Ryan Hass, a fellow at the Brookings Institution and the former director for China, Taiwan and Mongolia at the National Security Council, said.

“Rather than confront the challenge alone, the United States should work to address the problem as a team sport. Doing so would be more effective and less costly than hoping US-China tit-for-tat tariffs do not do significant harm to American workers, but do lead to a change in China’s economic policies,” he added.

Apart from the trade deficit, Trump has Chinese tech companies in his sights over intellectual property rights issues and unfair practices.

Smartphone giant

Loosely connected to this has been the decision by the US Justice Department to launch an investigation into smartphone giant Huawei for alleged violations of US export sanctions against Iran.

This, in turn, followed a move last month by the Trump administration to ban the sale of US technology and components, including semiconductors, to Chinese telecom group ZTE for similar offenses.

During the talks in Beijing that issue was brought up by Liu’s team, the state-owned news agency Xinhua pointed out. It will probably be back on the agenda next week after ZTE revealed it was ending “major operating activities.”

“The company and relevant parties are actively communicating with the US government to push an adjustment or even a cancelation of the sales ban. We [are trying to] promote things in a positive way,” the company said in a filing sent to the Shenzhen Stock Exchange on Wednesday,” which was reported by the state-run Global Times.

Once he puts away his shopping list, Liu looks certain to take out another one with the names of ZTE and Huawei on it.

Read: ZTE on life support after ‘major operating activities’ cease