U.S.-China Trade Talks End With Strong Demands, but Few Signs of a Deal

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BEIJING — Senior Chinese and American officials concluded two days of negotiations late Friday afternoon with no deal and no date set for further talks, as the United States stepped up its demands for Chinese concessions to avert a potential trade war.

The American negotiating team, which included Treasury Secretary Steven Mnuchin and the United States trade representative, Robert E. Lighthizer, headed for the airport after the talks and did not release a statement. But a list of demands that the group brought into the meeting called for reducing the United States’ trade gap with China by $200 billion over the next two years and a halt on Chinese subsidies for advanced manufacturing sectors.

The demands, which spread on Chinese social media and were confirmed by a person close to the negotiations, suggest that both sides have hardened their positions this week despite the two days of talks. Senior Chinese officials and their advisers sent a deliberate message to the West during a three-day seminar that ended on Monday that the days of conciliation by Beijing were over.

The person close to the negotiations insisted on anonymity because of diplomatic sensitivities.

The extensive list of United States trade demands was unexpectedly sweeping, and showed that the Trump administration has no intention of backing down despite Beijing’s assertive stance in the last few days. “The list reads like the terms for a surrender rather than a basis for negotiation,” said Eswar Prasad, an economics professor at Cornell University.

Chinese officials put the talks in a positive light. “The two sides agreed that a sound and stable China-U.S. trade relationship is crucial for both, and they are committed to resolving relevant economic and trade issues through dialogue and consultation,” Xinhua, the official news agency, said soon after the talks ended.

But the negotiations also highlighted key differences — and the American delegation’s tight-lipped departure from Diaoyutai, the parklike enclosure of guesthouses where the talks were held, suggested the two sides had made little headway in solving them.

For example, China protested penalties that Washington officials imposed last month on ZTE, a Chinese telecommunications company, for repeatedly violating American sanctions on Iran. The Commerce Department banned all shipments of American wares to ZTE, including chips and other equipment essential to many of its products. The move appears to have strengthened China’s resolve to continue its drive for self-sufficiency and to curb imports in a variety of high-tech fields.

China’s push to upgrade its technology accounts for many of its disagreements with the United States. The American document reiterated Trump administration calls for a broad halt of Chinese subsidies to manufacturers in advanced technology industries. Beijing’s $300 billion Made in China 2025 program calls for extensive government assistance to build domestic industries in aircraft manufacturing, semiconductors, artificial intelligence, robotics, electric cars and five other sectors. Chinese officials defend the program as essential to upgrading the economy and have said that they would not agree to any limits on the Made in China program.

The document also highlighted China’s trade surplus with the United States. It called for a reduction of $100 billion in the coming 12 months and a further $100 billion in the following 12 months, the document said. The American side also said that it wanted to be able to impose new restrictions on Chinese investment in the United States for national security reasons without any retaliation by Beijing, and with an agreement by China to reduce its own investment restrictions.

The United States also asked that China cut its tariffs on imports by about two-thirds to match those in the United States. China, which now has a manufacturing sector nearly equal in annual output to the United States and Germany combined, contends that it is still a developing country and should be allowed to retain higher tariffs.

Chinese officials have said that they would be willing to reduce some trade barriers, but only if the United States also lowered trade barriers. Chinese officials particularly object to American limits on the export of high-tech goods that have both civilian and military applications, contending that these restrictions prevent sizable potential exports.

They also objected to United States demands for a specific cut in the bilateral surplus. Li Gang, the vice president of the Commerce Ministry’s research and training institute, said in a separate interview last month that a $100 billion cut in the surplus was “impossible.” China’s surplus has been widening lately as the United States economy grows fairly strongly and takes in more imports.

The Commerce Department announced on Thursday in Washington that the trade imbalance with China had widened slightly further in March compared with the same month a year ago, although it narrowed slightly compared to February, possibly for seasonal reasons.

The lack of a deal this week, and the failure to schedule further talks right away, does not rule out the possibility that Chinese negotiators will visit the United States next month for further talks. One possibility that American officials have considered is whether China might send Vice President Wang Qishan, who is close to President Xi Jinping, on a follow-up trip.

So far, the Chinese side has been led by Liu He, a Politburo member who is also the vice premier for finance, trade and technology.

Trade experts have been saying for weeks that Chinese officials would like to resolve the dispute with the United States so that they can go back to focusing on issues closer to home.

“That’s the immediate problem, because it’s a headache for them that’s distracting from a very pressing domestic agenda,” said Christopher K. Johnson, a former C.I.A. officer who analyzed China and now holds the Freeman Chair in China Studies at the Center for Strategic and International Studies.

The Beijing talks were unlikely to result in a comprehensive deal, but experts said they could still be a first step toward reaching some sort of accord.

“There’s no way our team is going to risk signing up to something without getting back here and making sure that Trump is happy with it first,” Mr. Johnson said. “Maybe there’s also some optics where Trump wants to be seen standing with Wang Qishan and striking the deal.”

“I think we’re still several jumps down the track from that.”

Follow Keith Bradsher on Twitter: @KeithBradsher.

Chris Buckley contributed reporting.

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As U.S. and Chinese Teams Meet on Trade, One Side Has an Edge in Expertise

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Both countries have played down the possibility that the negotiations will resolve the simmering tensions between them. Still, Chinese officials’ lack of experience in international trade law could make it even harder for the two sides to find common ground before the talks end on Friday.

“We’re in a situation where the ministry of commerce doesn’t have all the people in place that it wants to have,” said James Zimmerman, a former four-time chairman of the American Chamber of Commerce in Beijing, citing the Chinese agency that traditionally handles trade matters. “I really think they are unprepared for the negotiation that is taking place.”

Chinese officials dispute that characterization, saying the reorganization will not hurt a stance that they describe as tough but of flexible.

“I don’t think it is a problem, or that this process of organizational reform will affect the ability to negotiate,” Li Gang, the vice president of the Chinese commerce ministry’s research and training academy, said in a recent interview.

The new team of top Chinese negotiators, few of whom come from the commerce ministry, is led by Liu He. Mr. Liu, an economist by training, is a close adviser and longtime friend of President Xi Jinping. Senior Chinese officials and their advisers spoke about economic policy at a three-day Tsinghua University seminar that ended on Monday. Most of them insisted on anonymity for reasons of diplomatic sensitivity.

Those attending the seminar said that Chinese negotiators had a warm relationship with Steven Mnuchin, the Treasury secretary who is a member of the American delegation and a former Goldman Sachs executive. He was described as easy to talk to.

Chinese officials said they felt less of a connection to the rest of the group, which includes, among others, Robert E. Lighthizer, the United States trade representative, who was described as brusque by people on the Chinese side; Peter Navarro, a top trade adviser and longtime critic of China; Larry Kudlow, who leads the National Economic Council; and Wilbur Ross, the commerce secretary.

[Read about the divisions on the American side of the table during high-level trade talks in Beijing.]

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Many of the negotiators representing the United States are more comfortable than their Chinese counterparts with the fine points of trade policy. Mr. Lighthizer, for example, has been immersed in trade issues continuously since the Carter administration, working closely throughout with Mr. Wolff, and has taken a harder stance.

By contrast, after a series of bureaucratic reorganizations in recent months, many of China’s top trade negotiators are now economists and bankers with little practical experience in trade matters. The commerce ministry’s two main officials for trade talks with the United States, veterans who have negotiated with Washington since the 1990s, were each awarded ambassadorships last year and dispatched to Europe.

One senior Chinese official at the seminar who insisted on anonymity said that there was deep frustration among his colleagues that, when the two sides have talked in the past, American negotiators have continually raised details about Chinese trade practices and international trade laws, while those on the Chinese side preferred to discuss a coherent economic strategy.

Chinese policymakers are also annoyed about the number of United States agencies involved in the talks. Officials in China are accustomed to dealing with the Treasury, which coordinated American economic policy toward Beijing for nearly two decades. They are less accustomed to dealing with the office of the United States trade representative, which has consistently tilted toward more assertive policies and has a prominent role under President Trump.

The senior Chinese official said that he missed the old Treasury-led team every day, and Chinese officials have suggested regularly this year that the United States revive that approach. Doing so could allow Treasury to take charge again, even though United States law says the trade agency should be in charge of trade issues.

On the Chinese side, the rise of economists and bankers is part of a broad reshuffling meant to consolidate the Communist Party’s political power.

As part of the reorganization, China’s commerce ministry was broken in March into three separate groups each focused on different issues. The ministry’s office of trade negotiations still exists and has numerous trade lawyers, but people involved with the negotiations say the shuffling has robbed the office of resources and support.

But even the trade negotiations office has effectively been sidelined by a Communist Party group led by Mr. Liu. The group, now called the Central Commission on the Economy and Finance, was originally intended to bring the country’s debt under control. To accomplish that, Mr. Liu, who was educated at Harvard, has hired dozens of economists and bankers, men and women in their 30s and 40s with graduate degrees from the most highly regarded economics departments and business schools in China and the West.

What the commission largely lacks are trade lawyers.

Chances that the talks would yield major progress appeared slim on Thursday. China’s official news agency, Xinhua, reiterated Beijing’s stance that should a trade war break out, the country was better prepared thanks to its centralized leadership, strong domestic consumer base and its greater desire to protect the current structure of trade.

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At the seminar over the weekend, Chinese officials also struck a defiant tone. Peng Guangqian, a retired major general who remains an influential military strategist, said, “President Trump wants to curb our development.”

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Trump Trade Officials Will Present a Hard Line in China, but Internally They Are Divided

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The delegation includes officials like Mr. Navarro and Robert Lighthizer, the United States trade representative, both of whom embrace a more combative approach to dealing with China than other advisers on the trip. Mr. Navarro and Mr. Lighthizer have been focused on China’s unfair trade practices for decades, and insist the country must make more dramatic changes to even the playing field for American companies. They also appear willing to follow through with the tariffs Mr. Trump has threatened, despite the pain it would inflict on many American businesses and workers, if they view it as necessary to increase their leverage with the Chinese.

Other members of the delegation, including Treasury Secretary Steven Mnuchin and Larry Kudlow, who heads the National Economic Council, appear more inclined to strike deals with the Chinese that would accomplish the president’s goal of reducing the gap between what America imports from China and what it sells to the country and head off the risk of an escalating trade war. Also on the trip are Wilbur Ross, the commerce secretary who has previously seemed receptive to striking deals, Everett Eissenstat, an experienced trade adviser, and Terry Branstad, the United States ambassador to China.

Yukon Huang, a China scholar at the Carnegie Institute, said the group is what he would call an “ideologically hybrid team” with competing views about what is really plaguing the U.S.-China relationship.

“It’s a mixture between two camps, one focused on trade issues, one focused on technology wars,” Mr. Huang said. “The reason it is such, and we don’t have a game plan, is the issues aren’t well understood.”

Among the concerns are a range of practices, including barriers to entry, subsidies and regulations that pressure American companies to hand over sensitive trade secrets, which China uses to make national champions of its homegrown firms. These tactics have enabled the Chinese to dominate global industries like steel, aluminum and solar panels in the past, and American trade advisers say they are currently tipping the playing field for industries of the future, including semiconductors, robotics, cloud computing, electric vehicles and biotechnology.

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China has been able to dominate global industries like steel, aluminum and solar panels in the past, and American trade advisers say it is tipping the playing field for industries of the future, including semiconductors, robotics, cloud computing, electric vehicles and biotechnology.

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China Daily, via Reuters

Speaking at the U.S. Chamber of Commerce in Washington on Tuesday, Mr. Lighthizer said that the United States has nearly a third of the world’s high technology business, followed by China, and that China’s trade practices were imperiling the economic future of the United States.

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“I’m always hoping but not always hopeful,” Mr. Lighthizer said about the prospect of success from the upcoming talks.

Many American industry leaders support Mr. Lighthizer’s efforts to expand access to Chinese sectors that are restricted to American companies and protect American intellectual property from theft and coercion — longstanding complaints of American business leaders about China’s tactics.

But they are wary of the administration’s approach to resolving longstanding problems. Some business leaders fear that the Trump administration may simply accept Chinese offers to lower the trade surplus by purchasing more American goods and open up segments of the economy that are already mature, like financial services, electronic payments or the auto sector. On the other hand, they worry about the economic damage from a trade war if the anti-China wing of the delegation wins the internal debate and follows through with its threats.

Thomas J. Donohue, the president of the U.S. Chamber of Commerce, said Tuesday that there were “serious, growing and legitimate challenges” about Chinese practices, but he also cautioned against the effect of a tit-for-tat tariff war.

“We are deeply concerned that the proposed tariffs list and escalating tariff threats from the administration will not effectively advance our shared goal of changing these harmful Chinese practices,” he said.

Analysts continue to warn of potential risks to economic growth in the United States if administration officials cannot negotiate a quick resolution with the Chinese, and the tariffs go into effect. Goldman Sachs analysts said in a research note this week that new investment restrictions on China that the administration plans to soon outline could also rattle investors.

“Some additional market-disruptive policy moves regarding U.S.-China trade seem likely,” Goldman’s Alec Phillips wrote in the research note, which downplayed the odds of success in this week’s talks: “We believe a substantial breakthrough at this meeting is unlikely as the issues the U.S. has raised — intellectual property policies, technology transfer, and the ‘Made in China 2025’ strategy, in particular — are not the type of technical trade issues that can be resolved quickly.”

The National Association of Manufacturers, one of the most influential business lobbying groups in Washington, has been pressing Mr. Trump and his economic team to open negotiations with the Chinese on a free-trade agreement, an ambitious move that many trade experts doubt would bear fruit, given the struggles of American negotiators to secure far more limited agreements with China in the past.

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The manufacturers’ president, Jay Timmons, urged Mr. Trump in a letter earlier this year to “consider pursuing a truly modern, innovative and comprehensive bilateral trade agreement with China that wholly restructures our economic relationship.” The group’s vice president for international economic affairs, Linda Menghetti Dempsey, told a congressional subcommittee in April that such an effort would be “at once both a radical idea and, in our estimation, the most pragmatic and effective way forward” on trade with China.

The Obama administration attempted to negotiate a more limited agreement with China, a bilateral investment treaty, but could not finalize the deal before Mr. Trump took office. His team has not yet revived the talks.

Manufacturers have discussed the plan directly with Mr. Kudlow and with Vice President Mike Pence. Proponents say they believe the idea could appeal to Mr. Trump’s preference for bilateral trade agreements and his confidence in his negotiation skills.

However, White House officials have given no public indication that they are considering such a negotiation. Mr. Lighthizer, Mr. Navarro and other proponents of a harder line against China have argued that the Chinese tend to use such dialogues as a delaying tactic, and that trade negotiations with the Chinese have not been productive in the past.

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