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Trade talks end in impasse with China warning trade benefits at risk if US imposes tariffs

US Commerce Secretary Wilbur Ross, third from left, with Chinese Vice Premier Liu He in Beijing on Sunday. Photo: Agence France-Presse/Getty Images

The United States and China ended their trade talks in Beijing on Sunday without any announced deals and with Chinese officials refusing to commit to buying more American goods without a Trump administration agreement not to impose further tariffs on Chinese exports.

A short statement, carried by the official Xinhua News Agency, made no mention of any specific new agreements after US Commerce Secretary Wilbur Ross met Chinese Vice Premier Liu He.

It referred instead to a consensus they reached last month in Washington, when China agreed to increase significantly its purchases of US goods and services.

"To implement the consensus reached in Washington, the two sides have had good communication in various areas such as agriculture and energy, and have made positive and concrete progress," Xinhua said, adding that details would be subject to "final confirmation by both parties".

Xinhua said that China's attitude had been consistent and that it was willing to increase imports from all countries, including the United States.

"Reform and opening up and expanding domestic demand are China's national strategies. Our established rhythm will not change," it added.

"The achievements reached by China and the United States should be based on the premise that the two sides should meet each other halfway and not fight a trade war," Xinhua said.

"If the United States introduces trade sanctions including raising tariffs, all the economic and trade achievements negotiated by the two parties will be void."

At the end of last month's Washington talks, the two countries released a joint statement.

But just when it appeared a trade truce between the two economic heavyweights was on the cards, the White House last week warned it would pursue tariffs on $50 billion worth of Chinese imports, as well as impose restrictions on Chinese investments in the United States and tighter export controls.

State-run Chinese newspaper, the Global Times, said in an editorial on its website that China needed to prepare for the long haul due to the US propensity for changing its mind and coming up with new demands.

"Tariffs and expanding exports - the United States can't have both," it said. "China-US trade negotiations have to dig up the two sides' greatest number of common interests, and cannot be tilted toward unilateral US interests."

Xinhua said in a separate commentary that the United States should not test China with any further flip-flops or provocations.

"The Chinese government's attitude of not wanting but also not fearing a trade war has never changed," it said.

"Both sides appear to have hardened their negotiating stances and are waiting for the other side to blink," said Eswar Prasad, professor of trade policy at Cornell University. "Despite the potential negative repercussions for both economies, the risk of a full-blown China-US trade war, with tariffs and other trade sanctions being imposed by both sides, has risen significantly."

Asked specifically on Fox's "Sunday Morning Futures" if the United States is willing to throw away its relationship with China by proceeding with threatened tariff hikes, Peter Navarro, director of the White House National Trade Council, pointed in part to an unfair relationship involving a multi-billion dollar trade deficit, Defense Secretary Jim Mattis' warning of China's activities in the South China Sea and the threat of China stealing US intellectual property.

"That's a relationship with China that structurally has to change," he said. "We would love to have a peaceful, friendly relationship with China. But we're also standing firm that the president is the leader on this."

China's position is unlikely to satisfy the Trump administration. Apart from reducing the huge trade imbalance, US officials want Beijing to move away from industrial policies that they say subsidize Chinese companies on the global stage and pressure foreign firms to hand over key technologies.

They are particularly worried about "Made in China 2025," a program which will pump hundreds of billions of dollars into high-tech industries like robotics and electric cars with the aim of making China a global leader.

Analysts say that China is unlikely to give ground on those plans, which it sees as vital for the future development of its vast economy.

Concern about ZTE

In addition to the tariff dispute, Chinese officials have expressed deep concern about ZTE, a 70,000-employee telecommunications company that has largely shut down operations in the past month after an obscure American government agency, the Bureau of Industry and Security, ordered United States companies to stop selling crucial microchips and software to ZTE for seven years.

Then, in a tweet nearly three weeks ago, Trump said that the Commerce Department should reconsider American sanctions on ZTE, without any obvious Chinese concession in exchange. The arrival of Ross and his team in Beijing had fostered optimism in China that the issue could be settled without any big moves by Beijing.

"Chinese officials know these talks are precarious, but may underestimate the domestic political cost Trump now sees in lifting the ZTE ban without major concessions from China," said Andrew Gilholm, the director of China analysis at Control Risks, a political and security consulting firm. "If the ban stays, Beijing's retaliation will definitely go up a gear."

Members of US Congress criticized the agreement to lift a ban on sales of US components to ZTE. In exchange, the company is to remove its management team, hire American compliance officers and pay a fine.

Chinese state media have glossed over why the United States sales ban was imposed: ZTE's ties to North Korea and Iran. The company's links to North Korea in particular are politically inconvenient for China because Beijing has claimed that China's enforcement of international sanctions against North Korea helped pave the way for the coming summit meeting in Singapore between Trump and North Korea's leader, Kim Jong-un.

State news outlets have portrayed the ZTE decision as having been made by Ross's Commerce Department, and they have suggested that it is merely a bargaining ploy as part of trade negotiations. But though the Bureau of Industry and Security, a law enforcement agency, is legally part of the Commerce Department, it has considerable autonomy.

Agents of the bureau carry badges and guns, and the agency has played a central role for decades in trying to prevent Iraq and Iran from obtaining nuclear weapons technology.

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