China’s Ministry of Commerce (MOFCOM) said on Thursday that China and the US have started “normal communication” in the economic and trade fields, and will work together to solve “specific problems” in a practical manner for producers and consumers.
While there are major differences between the two countries over a wide range of issues, the most pressing issue for both sides to address is punitive tariffs, Chinese trade analysts noted, calling for efforts to gradually lower or remove tariffs imposed over the past three years.
Following two dialogues between senior Chinese and US trade and economic officials in less than a week, the announcement from the MOFCOM marks a major shift in engagement between officials of the world’s two biggest economies, which has been notably stalled for months since US President Joe Biden took office in January.
At a routine press conference on Thursday in Beijing, Gao Feng, a spokesperson for the MOFCOM, offered further details about the latest conversations via phone or video link and said that initial communication between the two sides were smooth.
“Both parities thought that the exchanges were professional, candid and constructive. China and the US have started normal communication in economic and trade fields,” Gao said, stressing that in both dialogues, both sides adopted an attitude of equality and mutual respect – a crucial basis for talks insisted by Chinese officials.
Chinese Vice Premier Liu He held a virtual meeting with US Treasury Secretary Janet Yellen on Wednesday, which followed a phone call between Liu and US Trade Representative Katherine Tai just six days earlier, on May 27.
According to Gao, both meetings lasted around 50 minutes and both sides exchanged views on the general situation of bilateral economic and trade relations, domestic policies and other issues.
Going forward, for the sake of the two countries and the entire world, the two sides agreed to resolve “specific problems” in a pragmatic manner for producers and consumers and promote the sound and stable development of China-US economic and trade relations, Gao said.
“Tariffs are the biggest and most direct issue confronting China-US relations, and specific moves are required to gradually reduce or remove the punitive tariffs that have been imposed over the past three years,” Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing, told the Global Times on Thursday.
The Trump administration hit $50 billion of Chinese imports with punitive tariffs in April 2018, and over the following two years, the tariff war expanded to cover over $370 billion of US imports from China, leading to an increase in the average US tariff on Chinese goods to 19.3 percent from 3.1 percent.
The unprecedented unilateral trade protectionist campaign wreaked havoc on bilateral trade and the global trade landscape, said Tu, who closely follows China-US trade ties. In the wake of the three-year trade war with China, the US’ total trade fell by $50 billion, while its trade deficit ballooned by $200 billion.
“The Biden administration should show its sincerity by removing the tariffs imposed by his predecessor,” He Weiwen, a former economic and commercial counselor at the Chinese consulates general in San Francisco and New York, also told the Global Times on Thursday.
While it’s unlikely that the Biden administration will immediately remove all the tariffs, it’s possible for the tariffs to be rolled back in a gradual manner, according to Tu, suggesting that it could begin with rescinding tariffs on consumer goods or expanding tariff exclusion lists.
If the US moves in this direction, China could take corresponding measures, Tu added.
The punitive tariffs have been detrimental to the competitiveness of US firms and would put a drag on US economic growth, trade experts said.
Over 90 percent of additional costs resulting from the additional tariffs were absorbed by US importers, with Chinese exporters bearing less than 10 percent, ratings agency Moody’s said in a report in April.
The US Chamber of Commerce also warned in February that the tariffs would lead to higher costs of component imports from China, pushing up the manufacturing costs of multiple US industries such as aviation, semiconductors, chemicals and healthcare, and cutting their product edges.
Tu said that the tariffs only protect the least efficient firms and erode businesses’ motivation to innovate, thereby having a huge impact on US productivity and possibly playing a significant part in cutting the US economic growth rate.
On top of that, the US’ adoption of massive fiscal and monetary stimulus policies during the COVID-19 pandemic has resulted in soaring inflation, which poses a big threat to the US economic recovery, rendering the tariff rollback a solution to the US’ economic woes as well, Tu noted.
Commenting on the impact of the tariffs on US businesses on Thursday, Gao said that it fully demonstrated that imposing punitive tariffs is not beneficial for the US, other countries and global economic recovery.
Gao added that seeking common grounds while reserving differences has become a consensus between China and the US and both sides believe that China-US economic and trade ties are very important, and there are many specific areas for cooperation, Gao said.
During the talks, both sides also raised their concerns. “Fully considering the background and status of domestic economic development, the Chinese side expressed our specific concerns,” said Gao.
However, despite the enhanced trade and economic talks between Beijing and Washington, analysts cautioned that serious hurdles remain as the US continues to carry out toxic policies inherited from the former Trump administration.
It’s unlikely that these issues will be resolved in the immediate future due to the US’ increasingly burning hostility toward China, He said.