US, China Scramble to Revive A Deal as Trade Truce Collapses

By Staff, Agencies

The world's top two economies on Thursday were due to resume fraught trade talks just as a truce between them verged on collapse, with hostilities poised to escalate after months of seemingly collegial negotiations.

Rather than sealing a deal this week – as officials in both countries had previously hinted was possible – Chinese trade envoy Liu He instead returns to the bargaining table just hours before Washington is due ramp up tariffs on hundreds of billions of dollars in his country's most valuable exports.

US President Donald Trump tweeted Wednesday that Liu still wanted to "make a deal" but late in the day China vowed to retaliate by taking "necessary countermeasures" should Trump persist in more than doubling the tariffs on Friday.

Since last year, the two sides have exchanged tariffs on more than $360 billion in two-way trade, gutting US agricultural exports to China and weighing on both countries' manufacturing sectors.

US Trade Representative Robert Lighthizer released an official notice on Wednesday making the tariff increase a virtual fait accompli.

Duty rates on a vast array of Chinese-made electrical equipment, machinery, auto parts and furniture will jump to 25 percent at midnight Thursday (0400 GMT Friday), a painful leap up from the 10 percent first imposed last year.

Washington has demanded far-reaching and profound changes to the Chinese economy, such as submitting state enterprises to market principles, reducing massive subsidies and ending the alleged theft of US technology.

Analysts say China will be reluctant to make many of these changes, which could undermine the Communist Party's political power.

And it is possible each side believes it is better positioned than the other to withstand the pain of the trade war, according to Kennedy.

Trump suggested Wednesday on Twitter that he would be just as content to strike a deal as to leave punitive import duties in place, believing they generate billions in government revenue.

While US companies complain of lost export markets, disrupted supply chains and higher costs, the trade war has so far not knocked the steam out of the American economy, which continues to see steady growth and hiring amid falling unemployment.