The resurgence of trade negotiations today between the U.S. and China after several months of inaction has increased hopes throughout financial markets that the impending all-out trade war between the two largest economies in the world may be staved off.
For the first time since June, U.S. Treasury Undersecretary for International Affairs David Malpass and Chinese Vice Commerce Minister Wang Shouwen are due to meet from Wednesday for face-to-face trade discussions. The main topic of discussion during this meeting will be the next round of tariffs set to take effect this Thursday, August 23rd. This round of tariffs will effect nearly $16 billion worth of exports sent between China and the U.S. Also, the two sides will discuss the major points of friction between the global superpowers. These include readjusting trade and intellectual property.
While the act of holding a meeting with such strong economic implications bodes well for future discussions, it should be noted that the talks between Malpass and Shouwen are not expected to solve any major issues. In fact, President Donald Trump himself has lowered expectations for the results of the discussion. Additionally, President Trump has made it a point to discuss his accusations toward Beijing that they manipulated their own currency in order to counteract the effects of the tariffs. Since the two countries last met in May and June, the economy in China, primarily the strength of the yuan, has shown signs of weakness, which, according to President Trump, is an advantageous position for the United States.
Another notable issue is the dichotomy of opinions within the Trump administration on how they should handle the negotiations with China. For example, Treasury Secretary Steven Mnuchin seeks to explore a possible solution through extended negotiations with China. Conversely, U.S. Trade Representative Robert Lighthizer wishes to increase the amount of pressure that the United States is putting on China. Ligthizer has been one of the main catalysts for the tariffs being implemented.
Furthermore, the $16 billion in products that are slated to be hit on Thursday seem to just the beginning. The United States Trade Representative, USTR, has been holding hearings with plans of an additional $200 billion in imports being targeted as soon as September. While the yuan continues to weaken due to the current tariffs, there is speculation that the delegates from China may pledge to not let the currency devalue as long as the two sides continue negotiations.