How Will China Respond?

It does seem as if the year-long trade negotiations between China and the United States are at impasse (see Nick Beams' "China to hit back if new US tariff threat goes ahead"). We'll find out shortly. As Keith Bradhser notes:

President Trump said on Sunday that American tariffs of 10 percent on $200 billion in Chinese goods, imposed last September, would rise to 25 percent on Friday. The tariffs would take effect just after midnight on Thursday, meaning the United States could wake up on Friday to an even more damaging trade war. Treasury Secretary Steven Mnuchin said on Monday that the tariffs might be reconsidered if Beijing restored what the United States regards as previous Chinese commitments, and made progress beyond them. 

The president also threatened to put tariffs on another $325 billion in Chinese goods, without specifying when.

Based on Beams' write-up, Team Trump wants the finalized trade deal enshrined in Chinese law rather than merely a set of regulations:

The character of the negotiations has undergone a qualitative change. They had been intended to wrap up the months-long negotiations and come to a final deal, which would then be presented to US President Trump and his Chinese counterpart Xi Jinping for signing.

That perspective has been cast to the winds. It is extremely doubtful if anything like it can be put together again, given the US actions and demands.

The US has claimed that China backtracked on previous agreements to write its concessions into Chinese law but then retreated, saying the measures would be carried out by regulations that carry less weight.

According to reports in the Wall Street Journal, the US is demanding China submit an inventory of laws and regulations that it would enact to guarantee that it was complying with any agreement. In other words, the US would effectively dictate economic policy to the Chinese government.

Beijing appears to have rejected this demand, regarding it as an infringement on its national sovereignty.

The Chinese decision to attend the talks is based on the hope that negotiations will be able to continue in some form and so prevent, or at least delay, a rapid escalation of the trade conflict.

Even that limited prospect is under a cloud given that the position of both sides is hardening.

Yesterday Trump posted a further inflammatory tweet: “The reason for the China pullback and attempted renegotiation of the trade deal is the HOPE that they will be able to ‘negotiate’ with Joe Biden or one of the very weak Democrats, and thereby continue to ripoff the United States ($500 billion a year) for years to come.”

With Pompeo jetting around the globe issuing diktats and making threats, it seems, with 18 months until the 2020 general election, that the Trump administration has assessed that its best -- if not only -- hope of a second term is by going to war. Take your pick: China, Venezuela and/or Iran. It's a smorgasbord. Add that to the wars the U.S. is already managing and it's more slop than the most gluttonous war-pig could ever hope to devour.

The Chinese are not without retaliatory options. Bradsher notes that a nuclear option would be for the Chinese to disrupt the global corporate supply chain. "China makes a huge amount of the parts and components that American companies need to produce their finished products."

But my guess is that Trump is right: China sees him as a one-term president. So rather than going nuclear, Beijing will again stop buying American soybeans, purchases which resumed in December when it looked like a trade deal was within reach, and tariffs will be reimposed on American automobiles.