The US's large trade deficit with China and the two countries' difficulty in making concessions on strategic issues could drag on negotiations without achieving the desired results.
On May 10, US and Chinese officials are scheduled to meet in Geneva, Switzerland, to discuss trade. Many people expect the excitement from the trade deal with the UK announced on May 9 to continue to spread. However, there is no guarantee that this will happen.
"I only have low expectations. Because the tariffs are very high, and so are the tensions. It's easy to impose tariffs, but much harder to remove them," Wendy Cutler, Vice President of the Asia Society Policy Institute (ASPI), told CNN.
President Donald Trump has always opposed the trade deficit. He believes that this shows that the US is being "taken advantage of" and treated unfairly.
To date, he has imposed an additional import tax of 145% on all goods from China. Beijing also responded with a 125% tariff on US goods. The world's two largest economies are expected to suffer serious losses due to the trade war. Many signs of damage have begun to appear, both in terms of production, consumption, and GDP growth.
Therefore, investors, businesses, and consumers of both countries want the situation to improve. They hope that today's meeting will bring about positive changes. This will be the first official dialogue between high-ranking US and Chinese officials in Mr. Trump's second term.
Cutler said that during the meeting, Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer will mention the agreement with the UK. They want to prove that "US policy is working" and that other countries "are also concerned about China".
However, the scale of the deal with the UK is quite small. It was also a relatively easy deal to reach.
The UK has no room to negotiate further tariff reductions. The country is already subject to 10% tariffs - a level that the Trump administration insists is already very low and only applies to countries with balanced trade relations with the US. Last year, the US even had a $12 billion trade surplus with the UK.
So the 10% tariff remains in place in the deal. Some British car exports to the US will be taxed less. So will steel. The Trump administration appears to be leaving open the possibility of more exemptions.
"It's a nearly balanced trade relationship. China is a completely different story," Cutler told CNN.
According to data released by China Customs, US-China trade volume will reach 4,898 billion yuan ($668 billion) in 2024. However, the US trade deficit with China is huge, reaching $361 billion.
Almost no one expects this first round of negotiations to be able to return US-China tariffs to levels before Trump's second term. Bessent also admitted that in an interview with Fox News: "I think the discussions this weekend will focus on cooling tensions, not on reaching a big trade deal."
Recently, both sides have sought to minimize the economic impact of import tariffs. The US has temporarily exempted reciprocal tariffs on electronic equipment and computers, while easing tariffs on cars. Meanwhile, China is said to still exempt some types of pharmaceuticals, chips, and aircraft engines from the US. Reuters reported that the country also created a "white list" of US goods exempted from additional tariffs.
On May 8, Mr. Trump said he was not considering lowering tariffs to bring China to the negotiating table. However, on May 9, he wrote on the social network Truth Social that "an 80% tax on Chinese goods seems appropriate." This is considered a positive signal.
Meanwhile, Chinese officials have been more cautious. They have repeatedly called on the US administration to "correct its mistakes" by canceling unilateral tariffs. On May 8, a spokesman for the Chinese Ministry of Commerce affirmed that the country "will not sacrifice principles to reach an agreement with the US."
Susan Shirk - Professor at UC San Diego University commented that Chinese officials are acting more disciplined than in previous negotiations with the US: "They are skeptical of Mr. Trump and will be very cautious." Shirk said that this is putting pressure on the US President in the right direction. She predicts that China will show “goodwill to reduce the surge in exports, not just to the United States but to other countries.”
For Cutler, the best realistic outcome from today’s meeting is for the two sides to reach “a roadmap for further engagement.” Importantly, this could set the stage for a phone call between Trump and Xi. The US president also said on May 9 that he might consider calling Xi, depending on the outcome this weekend.
Conversely, there is also the possibility of a worst-case scenario, which could lead both governments to take more extreme actions. Both Cutler and Shirk recalled a 2021 meeting between US and Chinese diplomats in Alaska, where the atmosphere quickly deteriorated as officials from both sides publicly criticized each other. Each other with harsh words in front of the press.
"The worst thing is a big confrontation in front of the media," said Shirk. "That's exactly the kind of meeting that everyone wants to avoid," said Cutler, who served as deputy US Trade Representative under Obama.
Another worst-case scenario would be if the US and China "both take a hard line and fail to find common ground to move forward." That would increase the risk of an escalating tariff war.
On CNBC, Tianchen Xu, senior economist at research firm EIU, said that efforts to reach a comprehensive agreement "will take a long time and may not yield the desired results." The reason is that both sides have shown an unwillingness to compromise on issues related to strategic priorities.
"We think it will be difficult for the US and China to reach something similar to a phase one trade deal," Xu said.
In January 2020, the two countries signed an agreement after more than a year of intense negotiations. The details of the phase one trade agreement between the two sides were announced by the White House, which is 86 pages long and consists of 8 chapters.
It includes provisions on intellectual property in China, a commitment for China to buy at least 200 billion USD worth of US goods and services in the next two years, as well as not to manipulate its currency. In return, the US reduced tariffs on some Chinese goods. However, Beijing later failed to achieve its purchasing goals due to the COVID-19 outbreak.
(according to CNN, Reuters)