Trump team, China resume uphill effort to end trade rift

The U.S. and China opened a ninth round of talks Wednesday, aiming to further narrow differences in an ongoing trade war that has deepened uncertainty for businesses and investors and cast a pall over the outlook for the global economy.

The latest negotiating session on American soil follows a similar set of talks held last week in Beijing.

Larry Kudlow, a top White House economic adviser, said "good headway" was made when U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin met in the Chinese capital with a delegation headed by Vice Premier Liu He, a confidant of President Xi Jinping.

Kudlow expressed optimism that the parties would narrow the areas of disagreement further this week.

"They'll be here for three days, maybe more," he told reporters at a roundtable sponsored by the Christian Science Monitor.

Others said they've been encouraged by the tone of the negotiations thus far.

Myron Brilliant, head of international affairs at the U.S. Chamber of Commerce, estimated Tuesday that the two sides are 90% of the way to an agreement but cautioned that "the last 10% is the hardest part, the trickiest part."

At the heart of the dispute are the Trump administration's allegations that China steals technology and coerces U.S. companies to hand over trade secrets—all part of Beijing's zeal to overtake U.S. technological dominance. To pressure China, the United States has imposed tariffs on $250 billion in Chinese goods. The Chinese have counterpunched by taxing $110 billion in U.S. imports.

Forecasters at the World Bank and International Monetary Fund, among others, have downgraded their outlook for the global economy, partly because the U.S.-China rift is damaging trade and causing businesses to slow investment until they know how the dispute will end.

Tensions have eased somewhat since President Donald Trump and Xi met in Buenos Aires late last year and the administration ended up suspending its plans to raise tariffs on $200 billion of Chinese imports to buy time for negotiations.

Kudlow said the talks are covering a host of issues that the two sides "have never really covered before" and that progress was being made on all fronts—which is the assessment administration officials from Trump on down have been making publicly for weeks.

"We're not there yet and we hope this week we get closer," Kudlow said.

Analysts say two major sticking points, in particular, stand in the way of any agreement.

First, Trump wants to preserve at least the 25% tariffs he has imposed on $50 billion in Chinese imports as a way to maintain leverage over Beijing. China wants them lifted.

Second, the two sides must develop a mechanism to ensure that China honors any commitments it makes in an agreement. The administration complains that China has repeatedly failed to keep promises it made in previous trade talks.

The Chinese are widely expected to agree to buy substantially more American products—likely including soybeans and natural gas—to help narrow the United States' trade deficit in goods and services with China, which hit a record $379 billion last year. America's trade deficit with China has been one of Trump's chronic complaints, although many economists say a bilateral trade gap is relatively insignificant.

Congressional Democrats and others have warned Trump against reaching any agreement that settles for more U.S. exports to China without also requiring Beijing to adopt serious economic reforms.

"Stand firm," Senate Minority Leader Chuck Schumer, D-N.Y., said Tuesday. "Skip the political photo op and make good on your promise to stand up for American businesses and workers when China takes advantage."

Christopher Adams, a former China specialist at the Treasury Department and the Office of the U.S. Trade Representative who is a senior adviser at the Covington & Burling law firm, added: "There has to be something substantive on the structural issues. Otherwise, the criticism will be severe."

Whatever negotiators agree to, analysts say, they are unlikely to end the long-standing tensions between America's mostly open, capitalist economy and a Chinese economy in which the Communist Party and the central government command the dominant role.

Even with a deal, Adams said, "a lot of the underlying issues will still be with us unresolved because they're rooted in fundamental differences between the U.S. and Chinese systems."