A sour note creeps into economic talks

THE BRIEF honeymoon between the world’s two largest economies appears to be over.

Three months ago, President Donald Trump had warm words for his Chinese counterpart Xi Jinping after the two leaders bonded at Trump’s Mar-a-Lago resort in Florida. Within weeks, the Trump administration was touting early wins in talks with China, including more access for US beef and financial services as well as help in trying to rein in North Korea.

Now, the two sides can barely agree how to describe their disagreements.

High-level economic talks in Washington broke up on Wednesday with the two superpowers unable to produce a joint statement.

Commerce Secretary Wilbur Ross scolded China over its trade imbalance with the US in his opening remarks, and then both sides cancelled a planned closing news conference.

Both sides later made separate statements following the talks. Treasury Secretary Steven Mnuchin and Ross said China “acknowledged our shared objective to reduce the trade deficit which both sides will work co-operatively to achieve.”

China’s foreign ministry issued a reciprocal statement, saying both sides agree to start “constructive co-operation” to narrow the trade gap.

Trump campaigned on “protecting the forgotten man and putting America first, but if you can’t deliver their jobs back to them, the next best thing is to get them some retribution and that’s what’s happening here,” said Stephen Myrow, managing partner at research firm Beacon Policy Advisors in Washington.

It was the first meeting under the Trump administration of the two countries’ most senior economic officials, a ritual that began in 2008. Rebranded as the Comprehensive Economic Dialogue this year, the discussions were led by Mnuchin and Ross on the US side, and vice premier Wang Yang for the Chinese. Federal Reserve chairperson Janet Yellen took part in the talks, and executives including Alibaba’s Jack Ma and Blackstone’s Stephen Schwarzman met on the sidelines.

After last year’s forum, the two countries released a 6 589word statement asserting the mutual interest they share in each other’s prosperity. The document also included commitments, such as one by China to reduce excess capacity in its steel industry – still a major irritant as the Trump administration weighs whether to impose tariffs and quotas on steel imports.

“The Trump administration may have had unrealistic expectations of what China will do to balance trade,” said Shen Jianguang, chief Asia economist at Mizuho Securities Asia in Hong Kong. “Now it is the start of real hard negotiations.”

At opening remarks by the two sides on Wednesday, Ross complained about the trade gap with China in unusually blunt terms. While US exports to China have grown in recent years, imports from the Asian country have expanded even faster, leading to a $309 billion (R4 trillion) trade deficit, Ross said.

“If this were just the natural product of free-market forces, we could understand it, but it’s not,” Ross said, as Wang looked on.

“So it’s time to rebalance in our trade and investment relationship in a more fair, equitable and reciprocal manner.”