It was always going to be about interpretation. As China’s relationship with the United States enters a new phase, economists have been trying to pierce through the wall of soundbites emanating from Beijing and Washington.
Seventy-two hours after the talks were wrapped up in the US capital, details of a potential trade deal are still scant.
At first glance, last week’s intensive discussions appear to have laid the foundations of an agreement between the world’s two largest economies.
US President Donald Trump has even announced a projected mini-summit with China’s head of state Xi Jinping at his Florida resort in Mar-a-Lago, probably later next month.
He has also extended the March 1 deadline, which would have triggered another round of tariffs on Chinese imports worth up to US$250 billion.
But major question marks still remain about what exactly has been nailed down.
“It’s beginning to look like Trump will yield to the Chinese in America’s trade conflict,” Martin Feldstein, the professor of economics at Harvard University, wrote in a commentary, for Project Syndicate.
Part of his pessimism revolves around what he considers to be the core issues, including legally enforcing an agreement.
While progress has been made to reduce the record-breaking US trade deficit, which was a staggering a $323.32 billion last year, other sticking points remain.
A loose accord is also believed to include intellectual property protection, forced technology transfers and structural reforms. Washington has pushed hard on these demands. But how much ground Beijing has ceded is unclear.
Still, there was hardly a mention in the closing trade talks statement about allegations of cyber theft.
“The key issue is technology theft. Unless the Chinese agree to stop stealing technology, and the two sides devise a way to enforce that agreement, the US will not have achieved anything useful from Trump’s tariffs,” Feldstein said.
“Despite Trump’s upbeat [news] about progress in the talks, there is no suggestion that the Chinese will agree to stop stealing technology.”
The dynamics between the two countries have also changed following nearly a year of economic conflict.
Turning the clock back will prove nearly impossible.
Again, a future flashpoint would involve technology, according to Wang Tao, the head of Asia economics and chief China economist at UBS Investment Bank, as well as state-owned enterprises and the broader Chinese model of government subsidies.
She wrote on the Chinese media site Caixin:
“We do not see US-China trade relations returning to pre-trade war conditions. Most of all, the US will likely further restrict Chinese investment in the US, China’s access to technology and high-tech products in the coming years.
“We [also] think it is highly unlikely [China will] give up its ambition to move up the value chain and acquire advanced technology. While China may deepen reforms of state-owned enterprises, these reforms are likely to be designed to make SOEs more efficient and stronger, not to privatize or dismantle them.”
Failure to find a solution to that conundrum might simply plant the seeds of Trade War II.
Yet in the short term, even the American Chamber of Commerce in China has called for the Trump administration to push harder to create a level playing field for US businesses.
“There are mixed feelings about the tariffs, but a majority are in support of the tariffs continuing at the present time,” Tim Stratford, the organization’s chairman, told the media earlier this week.
“People don’t like tariffs, and that’s truly understandable. But they also think that maybe the tariffs have done some good in provoking very serious negotiations between the two sides.”
Now, all they have to do is come up with a “serious” solution. The jury is still out on that one.