Little Progress Made As US And China Wrap Up 6th Round Of Trade Talks

Following what was, by the FT's count, the sixth round of cabinet-level trade negotiations since the trade war erupted last year, it appeared that little progress had been made this week, as the US has reportedly been frustrated by China's unwillingness to offer concessions on the structural reforms that the US has demanded.

According to the FT, Chinese officials this week promised to deliver a full accounting of government subsidies, in accordance with WTO rules, but US officials are skeptical of this commitment. Meanwhile, Robert Lighthizer and his team have reportedly pushed back against a possible deadline extension.

Chinese officials have promised to provide a full list of all central and local government subsidies in accordance with World Trade Organization reporting requirements. They will also take steps to ensure that the subsidies do not violate WTO rules.  Mr Lighthizer’s team, however, is sceptical about such promises. "China’s system is so opaque that you would have to take their word that the WTO notification is complete," one of his team said. US officials are also frustrated that Mr Liu’s team has offered few market access concessions beyond what Mr Xi spelt out in a speech last April that focused on modest liberalisations in the financial and automotive sectors.

Beijing reportedly believes a meeting between Trump and Xi - which Trump has said would be essential to forging a final agreement - would be the best shot at a compromise that would shrink the US-China trade deficit, but avoid structural reforms to the Chinese economy. Beijing has resisted US demands to improve market access for foreign firms and ditch subsidies because it views these demands as an unwarranted intrusion on Chinese sovereignty.

However, Trump has said he would only accept a "real deal."

As one analyst argued, delaying the deadline might not be the market panacea that the Trump Administration is hoping for.

According to people briefed on the talks, earlier this week USTR and White House officials were "livid" about leaks, first reported by Bloomberg, that Mr Trump was considering a 60-day extension of the March 1 deadline.  That leeway, if granted, might not be enough to calm investors, some of whom warned that a delay in the decision on trade tariffs would lead to greater uncertainty for companies in China. “The longer you wait, the more sentiment could deteriorate because corporate investment spending is on pause,” said Ben Luk, a global macro strategist at State Street Global Markets.

The interpretation offered by Chinese media was somewhat more charitable, perhaps because China is hoping to convince Trump that enough progress has been made to warrant delaying the next round of punitive tariffs, which would hike the rate on $200 billion in Chinese goods from 10% to 25%. As was expected, President Xi returned the favor to Trump by meeting with the US delegation Friday afternoon, local time.

Treasury Secretary Mnuchin was more reticent.

If Chinese media reports that a memorandum of understanding has been signed - something that was identified as one of the key goals for this round of talks - were accurate, then that could be enough to push Trump to override Lighthizer and delay the next round of tariffs, on the hope that he and Xi can hash out a final deal during a make-or-break summit (possibly at Mar-a-Lago). Meanwhile, the SCMP has reported that talks between the two delegations would continue in Washington next week (in what would be the seventh round of talks), and while "some progress" had been made during this week's round of negotiations, it was "not enough to seal a final deal."