The Key Issues in the US-China Trade Negotiations – Introduction
In 2018, after the US passed the tax reform package, Donald Trump’s next move was on trade. In January, he announced that the country would start renegotiating the past trade deals. His first decision was to place steel and aluminum tariffs on imports. The next move was to place tariffs on a select Chinese imports. Then, he started negotiating with Mexico and Canada. Then, he started talking with the Europeans.
In December, the president met with China’s Xi Jinping to discuss trade. The two leaders agreed on a détente that was intended to give space for the negotiations. The deadline of these negotiations was to be on March 1. If there was no deal, the US would increase the tariffs on Chinese goods worth $200 billion to 25%.
The Chinese and American negotiators have been meeting to try and iron out the key differences. However, as the March 1 deadline nears, there is still no deal. In a tweet yesterday, the US president said that the talks were going on well and then he extended the deadline. This has raised the likelihood of a deal being reached between the two countries. This article looks at the key contentious issues in the talks.
First, the US has long-accused China of engaging in currency manipulation. This is a situation in which the country manipulates its currency so that it can be weaker. A weaker currency is usually a good thing for an export-relying economy like China. For years, China has rejected the idea that it manipulates its currency.
Second, the US has accused China of having a large trade surplus. Trump has particularly paid close attention to the more than $300 billion worth of trade deficit with China. China agrees that it has huge surpluses and the officials have suggested increasing the purchases of US goods like soybeans and crude oil.
Third, the US has accused China of forcing joint ventures, which lead to intellectual property theft. For an American firm to establish a base in China, it is required to form a joint venture with a Chinese company. As joint partners, the companies have access to trade secrets, which they then use to launch similar products. This happened in companies like Google and Facebook, which tried to establish a base in China. The competing companies like Baidu and Didi pushed them away.
Fourth, China has been accused of engaging in large-scale hacking of the United States. In recent years, many cybersecurity companies have pointed to many hacks that come from the Chinese government. China has rejected these accusations.
Fifth, the US has accused China of forced technology transfer. This is a situation where China forces American firms to transfer their technology. Again, China has rejected that it does this. It argues that the companies transfer the technology voluntarily.
Finally, the US has accused China of having large tariffs on American goods. For example, a Chinese car imported to the US is charged a tariff of 2% while an American vehicle exported to China is charged a tariff of more than 25%.
Therefore, if a deal is to be made between the two countries, the challenge will be on enforcement. For example, will there be a court set to deal with these issues? If so, who will sit on the court. However, experts believe that a deal will be a good thing for the market and will help reduce the ongoing tensions.