It was the Washington-Beijing negotiations that hit the headlines after Trump increased tariffs from 10 percent to 25 percent on about $200 billion in Chinese goods, after first imposing measures last July. Beijing has punched back by taxing $110 billion of US products.
The setback in the talks could yet herald a full-blown trade war between the world’s two largest economies; both sides had wanted to do a deal at or before next month’s G20 in Japan, but achieving this goal is now much less certain.
To be sure, the talks have made significant progress, with both sides poring over a document thought to run to 150 pages. While Beijing has denied it, Trump asserts that the main blockage to a deal is China backtracking on provisions previously agreed on issues such as state subsidies, intellectual property rights and currency manipulation.
Given Trump’s mercurial nature, it remains possible that the current impasse is merely a prelude to a deal being agreed soon that he will shower in such superlatives as the “greatest agreement ever.” However, there is a growing chance that the talks will collapse, leading to an unpredictable phase in relations.
Beijing is well aware that Trump’s rhetoric could again become hostile, as it was during much of 2016 and 2017. He has previously asserted that “China … has been very tough on our country. We probably lost last year $500 billion in trade to China.”
It is to this narrative that Trump may yet return if he judges it in his political interests, especially in the context of his 2020 re-election campaign and fulfilling his pledge to “Make America Great Again.” This includes reducing the US global trade deficit and cracking down on trade practices perceived to be unfair.
It is conceivable, in relation to China, that the president could claim to have delivered this agenda by being “tough” on Beijing with tariffs rather than reaching a new trade deal. He rehearsed these arguments last week, asserting that China “broke the deal ... they can’t do that. So they’ll be paying ... nothing wrong with taking in more than $100 billion a year.”
It is not just Washington’s diplomacy with China that is now much less certain, but with Pyongyang too. Last Thursday the North Korean regime completed its second missile test in less than a week. This came after the US-North Korea summit in Vietnam in February ended in a diplomatic disaster, after months of painstaking negotiations had been expected to yield a deal, when Trump walked out of talks with Kim Jong Un. To be sure, there are historical precedents for such high-profile negotiations to collapse and then recover, such as the US-Soviet negotiations between Ronald Reagan and Mikhail Gorbachev in 1986 and 1987.
However, it appears the gaps between Trump and Kim remain substantial. The North Koreans have asserted post-Vietnam that they will not change their position, and also disputed Trump’s account that the reason the talks collapsed was that Pyongyang asked for full sanctions roll-back.
If the talks are to be rejuvenated, it is likely that outside powers such as China and Russia will have to row in to put pressure on North Korea. And it is here that Trump finds himself in a bind given the flailing trade negotiations with Beijing.
Part of the reason Kim originally came to the negotiating table in 2018 was the tightening of the screws on him by China, especially on the trade front. But if a new chill develops between Washington and Beijing, the latter will have less incentive to assist, not least given its long-standing reluctance to take too sweeping measures against Pyongyang for fear of squeezing it so hard that it becomes significantly destabilized.
From the vantage point of Beijing, this risks Pyongyang behaving even more unpredictably, and the outside possibility of the sudden implosion of the regime. This is not in Chinese interests for at least two reasons.
Firstly, if the communist regime in the North falls it could undermine the legitimacy of the Chinese Communist Party too. In addition, Beijing fears that the collapse of order in its neighbor could lead to instability on the North Korea-China border, a large influx of refugees that it would need to manage, and ultimately the emergence of a pro-US successor state.
Any decisive breakthrough in US-China talks may now require the personal intervention of Trump and Xi at the G20, or a special summit in China or the United States. Failure to secure a trade agreement will not just be a setback for bilateral relations, but also undermine other US goals in the region, including prospects of getting North Korean diplomacy back on track.