High-level US-China trade talks to take place

Senior US and Chinese officials will meet today to discuss the implementation of the Phase 1 trade deal that came into effect on February 15.

Both US Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He, chief negotiators for their respective parties, are expected to attend the virtual meeting that is billed as a routine six-month review.

Despite assurances from White House Economic Adviser Larry Kudlow that the “numbers are looking really good”—with trade being the one area in which Beijing and Washington are cooperating—expect discussions to be tense. Although the Phase 1 agreement calls for China to increase its exports to the US by $77 billion this year—particularly in commodities such as energy, farming and manufacturing products—the economic impact of COVID-19 has seen China fall significantly behind on its commitments.

Expect US officials to take a tough stance on the energy front. President Trump has vigorously supported domestic producers after the pandemic-induced hydrocarbons price collapse and associated supply glut devastated the US shale industry. In April, he uncharacteristically berated Saudi Crown Prince Mohammad bin Salman over the failure of OPEC+ to adequately curtail production, and has suggested that a Biden administration would permanently hobble the US energy industry.

Although Washington is unlikely to re-impose tariffs on Chinese imports, the talks are unlikely to produce progress. Expect China to protest Washington’s unrelenting pressure on its companies, despite Beijing’s commitment to the trade deal in February.

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