US-China trade talks stumble over 'relatively big' disagreements

As part of a wide-ranging document delivered overnight, the US requested that the Chinese reduce their trade surplus by at least $200bn by the year 2020.

Among its many other demands, Washington called on China to lower import tariffs, stop cyber hacking and even to give up the claim of being an open market economy.

US officials also wanted China to stop trying to force US companies to transfer technology to their own and to eliminate state subsidies to its industrial champions.

So while on Friday it was reported by the Xinhua news agency that a consensus had been reached on some topics, there were "relatively big" disagreements over other issues.

"The two sides agreed that a sound and stable China-US trade relationship is crucial for both, and they are committed to resolving relevant economic and trade issues through dialogue and consultation," the state-run agency said, adding that both sides agreed to establish a work mechanism to keep in close communication on these and other important issues.

In 2017, the trade gap, the difference between Chinese goods sold to the US and American goods exported to China, swelled to $375.2bn from $347bn the year before, according to Commerce Department data released in February, leading to the imposition of tariffs by the White House on Chinese imports such as steel and aluminium.

Indeed, market watchers were quick to pick-up on the fact that no joint statement was released after the two days of talks.

Nonetheless, early on Friday US Treasury Secretary Steven Mnuchin, the leader of the US delegation, said there had been “very good conversations” between his team and that led by Chinese Vice Premier Liu He.

Discussions are also understood to include US complaints concerning Chinese trade practices that are viewed as unfair by the US delegation.

The delegation is said to be specifically concerned that China is already targeting US farmers and agricultural products and is seeking assurances that the sector will not see retaliation over restrictions placed on Chinese investments.

Chinese tariffs on US agricultural products have not yet been implemented, but proposed 25% tariffs on commodities such as soybeans are already making waves, with sales to the Asian giant falling by 10% from on a year earlier over the last month.

While many were hoping that the talks may help to avoid a looming trade war, most analysts had already reached the conclusion that a deal had never been likely on Friday.

"Demands made by the US going into this week’s trade negotiations with China were unrealistically high and an agreement today was never likely," said Chang Liu at Capital Economics.

"Ultimately, whether negotiations between the two countries succeed will depend on the extent to which the US is prepared to compromise on its unrealistically high opening demands. The fact that the two sides haven’t given up negotiations suggests that a compromise can still be reached and a damaging trade war averted."

For their part, economists at Barclays told clients that: "President Trump’s rhetoric suggests they will likely only be implemented if negotiations with China fail. The visit of the US trade delegation led by the Treasury Secretary this week was therefore of particular importance but did not deliver much progress. Officials stated, however, that the dialogue would continue with a view to resolve trade problems."