Lack of Progress at U.S.-China Talks Raises Stakes for Trump

By Jacob M. Schlesinger Features Dow Jones Newswires

High-level economic talks between the U.S. and China ended Wednesday without any progress, leaving the Trump administration's efforts to recast trade ties with Beijing in limbo.

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After a full day of bilateral meetings, the U.S. side issued a terse statement saying that "China acknowledged our shared objective to reduce the trade deficit which both sides will work cooperatively to achieve."

The statement didn't provide further details on just how much the two sides could agree on, or when they would resume discussions. Chinese officials made no comment.

The failure to take concrete steps to close America's $347 billion trade deficit raises pressure on the Trump administration to consider shifting from its embrace of cooperation with Beijing toward more confrontation.

The meetings were held to mark the end of a 100-day period that President Donald Trump and Chinese President Xi Jinping had set to come up with a comprehensive plan to reset commercial ties between the world's two largest economies.

The U.S.'s statement, issued by Commerce Secretary Wilbur Ross and Treasury Secretary Steven Mnuchin, the co-chairs of the American delegation, added that the administration would pursue a trade policy seeking a "level playing field" for "American workers and businesses."

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But it didn't elaborate on whether the U.S. would now pursue that by ramping up unilateral trade actions that Trump aides have been weighing.

The decision to issue a statement from just the U.S. side was a break with past practices after similar negotiations held in recent years during the Obama and Bush administrations. In the past, both countries issued common statements summarizing what they had discussed and emphasizing areas of agreement. It was also a contrast with the more amicable joint statement given by Mr. Trump and Mr. Xi during an April Florida summit.

Both sides also canceled plans to hold a press conference at the end of the talks.

It was clear when the talks began Wednesday morning that both sides were braced for a tough day of talks. In his opening remarks, Mr. Ross said he wanted to "rebalance our relationship in a more fair and equitable direction," and, while pointing to modest sector-specific, market-opening agreements that he had reached with Beijing two months earlier, noted "the hardest work remains to be done."

Chinese officials had cautioned against veering off the path of cooperation.

"Dialogue cannot immediately address all differences, but confrontation will immediately damage the interests of both," Chinese Vice Premier Wang Yang told Mr. Ross and his team at outset of the day's meetings.

Wednesday's negotiations offered a kind of a reality check for the Trump administration as it assesses the surprisingly cordial bilateral relationship struck up between the two presidents during their April summit at Mr. Trump's Mar-a-Lago Florida resort. At the time, Mr. Trump set aside his campaign-trail attacks on Chinese trading practices and agreed with Mr. Xi to launch a "100-day action plan" to reset commercial ties through a new "Comprehensive Economic Dialogue."

This week's meetings, the first in that dialogue, were scheduled to mark the end of that 100-day period and to assess whether the two governments can work cooperatively to craft a broad plan easing long-festering trade tensions, or whether Mr. Trump may ramp up plans to take a more adversarial approach. The U.S. leader's trade advisers include longtime China critics.

As preparation for that latter path, Trump aides have been reviewing, among other things, the prospect of imposing tariffs on Chinese steel and solar panels and imposing tighter limits on Chinese investment in the U.S.

The administration has so far chosen not to implement those policies, but Mr. Trump has indicated a frustration with Chinese trade progress and a desire to do more.

"We have to fix the trade with China because it's very, very nonreciprocal," he told reporters last week. "We have the worst of all trade deals...with China."

Mr. Trump's administration has faced a similar dilemma -- between cooperation and confrontation -- in its geopolitical discussions with Beijing. In the weeks since the Mar-a-Lago summit he has edged toward a harder line. Mr. Trump rebuffed Chinese objections in approving news arms sales to Taiwan, which Beijing considers a renegade province, and sent bombers and naval patrols this month to the South China Sea to assert American freedom to navigate those contested waters. Mr. Trump also tightened economic sanctions against companies and banks allegedly doing businesses aiding North Korea's nuclear program.

The North Korea issue in particular may affect Mr. Trump's economic approach to China. The president said earlier that he would cut China some slack on trade in return for Beijing's help curbing Pyongyang's nuclear ambitions. He has since said he was disappointed with China's efforts, which may make him feel freer to yield the trade club.

"In terms of North Korea, our strength is trade," Mr. Trump said last week.

The Trump team early on expressed optimism that it had found a new formula for solving nettlesome trade tensions where prior administration has failed. In May, as part of a quick down-payment, the two governments announced agreement on Chinese market-opening measures in agriculture and finance, with a Chinese pledge to deliver concrete results before this week's meetings.

But some U.S. business groups and affected companies have complained that while China has met the letter of its pledges, it has failed to live up to the spirit of them, removing the promised trade barriers, while leaving other impediments in place. A new tiff flared up this week when Dow Chemical Co. said China had appeared to renege on a promise to provide an expedited review of its genetically modified soybean crops as part of the May pledge to accelerate approval of eight stalled biotechnology products.

The Chinese government said there had been a misunderstanding and that the Dow product hadn't been on their priority clearance list.

--Kate O'Keeffe in Washington and Jacob Bunge in Chicago contributed to this article.

Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com

(END) Dow Jones Newswires

July 19, 2017 20:09 ET (00:09 GMT)