U.S. and Chinese negotiators start two days of high-level talks Wednesday aimed at settling a six-month trade war that has weakened both sides, shaken financial markets and clouded the outlook for the global economy.
Yet the odds seem stacked against any substantive resolution this week to the standoff between the world’s two biggest economies. Perhaps the best that might be hoped for, analysts say, is for the two sides to agree to keep talking.
The differences between Beijing and Washington are vast. The United States is essentially demanding that China downsize its economic aspiration to become a supreme world leader in such fields as robotics and electric cars.
“A comprehensive deal that fundamentally changes their system — I don’t think that’s possible,” said Christopher Adams, a former U.S. trade official specializing in China and now a senior adviser at the law firm Covington.
Earlier negotiations flamed out. And this time President Donald Trump might be inclined to drive an especially hard bargain after being forced to cave in a dispute with congressional Democrats that partially shut the federal government for 35 days.
Moreover, a new complication injected itself into U.S.-China relations on the eve of the talks when the Justice Department brought criminal charges Monday against the Chinese tech giant Huawei, accusing it of stealing technology secrets and violating sanctions against Iran. Beijing shot back by demanding that the Trump administration pull back from what it called an “unreasonable crackdown” on the Chinese maker of smartphones and telecom gear.
“We are anticipating no big outcomes this week,” said Erin Ennis, senior vice president at the U.S.-China Business Council.
A deadline looms. On March 2, the Trump administration is scheduled to escalate its tariffs on $200 billion worth of Chinese imports from 10 percent to 25 percent.
The American delegation to this week’s talks is led by Trade Representative Robert Lighthizer, a longtime critic of aggressive Chinese trade practices and of U.S. policies that failed to blunt them. Heading the Chinese team is Vice Premier Liu He.
The core of the U.S. allegations against China is that Beijing systematically steals trade secrets, forces foreign companies to hand over technology as the price of access to the Chinese market and subsidizes its own tech companies.
But compelling China to reform its trade policies and treatment of foreign companies will be difficult.
What happens next?
If the two sides cannot reach an agreement by 1 March, the US has said it will increase the tariff rate from 10% to 25% on Chinese goods worth an estimated $200bn.
Mr Trump has also threatened tariffs on an additional $267bn worth of products.
With White House advisors reportedly divided, the focus is on Mr Trump, who is scheduled to meet with Mr Liu in Washington this week as part of the talks.
Mr Trump may decide a deal would boost his political standing after a bruising fight with Democrats over border wall funding and the government shutdown.
But he could also hope to shore up his base with protectionism.
Analysts at Capital Economics said: "We think the two countries may just be able to reach a face-saving agreement to tide them over in the short term and avoid an escalation."
For now, odds favour the limited truce lasting a little longer.