Prof. ST Hsieh
Director, US-China Energy Industry Forum
July 5, 2022
It is encouraging that US Treasury Secretary Yellen and China Vice Premier Liu had a phone call on July 4th, the US Independence Day. There are other high-level US-China Dialogues on geopolitics, but this high-level was focused on economic and appeared substantive: The Chinese readout noted that the exchange was “constructive” and “pragmatic.“ In a statement following Tuesday’s talks, the US Department of the Treasury called it a “candid and substantive conversation”.
“Constructive” and “pragmatic”, “candid and substantive conversation” are diplomatic wordsmithing, only the participants may be able to pin-down the meanings. For the public, probably they all mean that the participants did not crash the conversations and maintained civility. But different wordings probably mean that they have not reached any specific agreement. US and China need to take solid actions to stabilizing the bilateral relation starting with improving the trade relations so reducing trade barriers are urgent.
US-China relation is very complex and challenging already, the war in Ukraine adds significant stresses.
But it is also clear that the global economy is facing severe challenges. However, each nation faces different challenge and there is no “one size solution” fits all. For example, European nations are facing an immediate energy crisis, US is in the position of exporting more LNG which is good news for US economy. China and India etc. benefit from re-directed Russian oil and gas from Europe. There is nothing that China and India can do for easing European nations energy crisis: sanctions and embargoes are between Russia and Europe.
On the other hand, it is obvious that if European economy crashes badly, global recession is inevitable then both the US and China will suffer too. In that case, no amount of strengthen macro-policy communication and coordination between the US and China can help the world escaping the curse of a severe global recession that will last a long time.
It is not easy for leaders in the US and China not to focus on their domestic and bilateral issues, Biden and Xi need to have a summit to reset the US-China relation. However, as the world No. 1 and No. 2 economies, Biden and Xi should have the mindset and leadership capacity to support the health of a very fragile global economy. It may be too much to ask, but we tried.
US and China discuss economic challenges as talk of tariff rollback swirls
Updated 7:21 AM ET, Tue July 5, 2022
Hong Kong (CNN Business)The United States and China held talks Monday to discuss the huge challenges facing the global economy amid mounting speculation that some Trump-era tariffs could be cut to ease inflation and boost growth.
US Treasury Secretary Janet Yellen and China’s Vice Premier Liu He — Beijing’s top economic official — had a “substantive conversation” on a call, according to a statement by the US Treasury.
The talks, which readouts from both sides suggest were initiated by the United States, were described as “candid” and come as Bloomberg and The Wall Street Journal report that the Biden administration may lift some tariffs on Chinese goods as soon as this week.
The Chinese readout noted that the exchange was “constructive” and “pragmatic.” It added that the two sides discussed “views on the macroeconomic situation and the stability of the global industrial chain and supply chain.”
From the World Bank to Wall Street, there is a growing concern about the risk of a global recession, and inflation not seen in decades is hammering consumers in the United States and Europe.
China’s economy, meanwhile, has been battered by the country’s zero-Covid policy. Analysts worry that the Chinese economy could contract in the second quarter, putting the government’s annual growth target of 5.5% for 2022 out of reach.
The Chinese side also “expressed its concern over issues such as the lifting of additional tariffs and sanctions imposed by the United States on China and fair treatment of Chinese companies,” according to the Chinese statement.
The US readout did not mention tariffs or sanctions but stated that Yellen “raised issues of concern” including the impact of Russia’s war against Ukraine on the global economy and what it called China’s “unfair, non-market” economic practices.
The call between the two senior economic officials comes after Bloomberg reported Monday that Biden may announce a “rollback of some US tariffs on Chinese consumer goods” this week.
The report, which cited unnamed sources, said the move is seen “as a way to counter accelerating inflation.”
The Wall Street Journal also said Monday that Biden may decide on Chinese tariffs this week, citing people familiar with the situation, but added that the decision is “constrained by competing policy aims: addressing inflation and maintaining economic pressure on Beijing.”
The White House did not immediately respond to a request for comment.
“The timing makes sense,” said Jingyang Chen, Asian foreign exchange strategist at HSBC, pointing to the fourth anniversary on July 6 of the start of former President Donald Trump’s trade war with China
A cut in US tariffs is “around the corner,” said Ken Cheung, chief Asian foreign exchange strategist at Mizuho Bank, on Tuesday.
The Biden administration has “strong political motivation” to ease tariffs in order to bring down inflation before the mid-term elections in November, he added.
— CNN’s Beijing bureau contributed to this report.
China, US senior officials hold video talk, with Beijing raising concerns over tariffs and sanctions: report
By Global TimesPublished: Jul 05, 2022 11:58 AM Updated: Jul 05, 2022 11:54 AM
Chinese Vice Premier Liu He held a video conversation with US Treasury Secretary Janet Yellen on Tuesday and raised concerns about the US’ imposing additional tariffs on Chinese goods and sanctions against China, as news reports emerged from the US recently that Washington may lift the tariffs.
The two sides also reached a common view that the two countries should strengthen macro-policy communication and coordination, as well as jointly maintaining the stability of the global industrial and supply chains, according to a report by Xinhua News Agency.
According to Xinhua, Liu, who is also chief of the Chinese side for the China-US comprehensive economic dialogue, held a video conversation with Yellen on Tuesday morning at the latter’s request.
The two sides had a “pragmatic and candid” exchange of views on such topics as the macroeconomic situation and the stability of the global industrial and supply chains, according to Xinhua.
They agree that as the world economy is facing severe challenges, it is of great significance to strengthen macro-policy communication and coordination between China and the US. And jointly maintaining the stability of the global industrial and supply chains is in the interests of both countries and the whole world.
Also, China expressed its concern about issues including the lifting of additional tariffs on China and sanctions by the US side, as well as fair treatment of Chinese enterprises. The two sides also agree to maintain communication, according to the report.
The communication came at a time when the Biden administration is reportedly considering adjusting the punitive tariffs on Chinese goods imposed by former US president Donald Trump. According to Bloomberg, Biden might announce as soon as this week a rollback of some US tariffs on Chinese consumers goods, as the US government is looking for ways to combat surging inflation.
On the other hand, the US government might even get tougher in some other areas as a way of cracking down on China’s continued rise. The aforementioned Bloomberg report, for example, noted that Biden may launch a new probe into industrial subsidies that could lead to more duties in strategic areas like Chinese developed technology.
The talk is of crucial importance amid complex and grim global geopolitical and economic situation, He Weiwen, an executive council member of the China Society for World Trade Organization Studies, told the Global Times on Tuesday.
It reflects China’s active efforts to support globalization and seeking cooperation with the US to contribute to a stable and sustainable global economic recovery as a responsible country, He said.
As for China’s persistent requirement of lifting additional tariffs imposed on Chinese products, He said that the country firmly maintains its rights and interests and is strongly against Western countries’, especially the US, escalating containment of China.
“The source of potential systemic risks for the US is soaring inflation and potential domestic recession rather than China. Instead of containing China – which is doomed to fail – the US should seek win-win cooperation with China,” He said, noting that the US should remove additional tariffs and technological blockade on China as soon as possible to jointly support multilateralism and global cooperation.
He also predicted that the Biden administration may lift tariffs on Chinese consumer products, while those connected with the so-called national security and curbing China’s science and technology development may remain.
“The longer the Biden administration hesitates, the more the US and American people will lose,” Mei Xinyu, a research fellow at the Chinese Academy of International Trade and Economic Cooperation of China’s Ministry of Commerce, told the Global Times on Tuesday.
These tariffs have no more effect except making US consumers spend more and threaten the US economy, Mei said. In order to thoroughly solve its domestic economic problems and avoid falling into the plight of great inflation the US had experienced in 1970s, the Biden administration should reverse its harmful actions right now, including widespread sanctions against Russia and ultra-loose monetary policies, he said.
SCMP: As US-China talks resume, an end to years of trade tariffs may not signal a soft landing in rivalry
Tue, July 5, 2022, 2:30 AM
Tuesday’s long-awaited meeting between top economic officials from China and the United States appeared to be a step toward a widely anticipated rollback of punitive tariffs on some Chinese products, four years after being put into place.
However, some analysts surmise that any such move by Washington would be aimed squarely at tackling decades-high inflation in the US, and that changes to the Trump-era tariffs would not alter the course of the two sides’ bilateral technology war and rivalry.
In their first call since October, Chinese Vice-Premier Liu He was said to have had a “pragmatic and frank” exchange with US Treasury Secretary Janet Yellen on economic and tariff issues, as well as the importance of stabilising the global industrial and supply chains, according to the official Xinhua News Agency.
“The exchanges were constructive,” the party mouthpiece said, adding that both sides believed that the global economy “is facing severe challenges, and it is of great significance to strengthen the communication and coordination of China-US macro policies”.
However, Chen Fengying, a senior researcher with the China Institutes of Contemporary International Relations, said after the talks that the tariffs have little impact on Chinese exports, which have seen extraordinary rises during the pandemic, and that Beijing will not make concessions.
“[Tariff cuts would be] for the sake of addressing US problems, and only non-strategic goods would be eligible,” she said. “It doesn’t mean an abrupt China policy change by the Biden administration, nor a halt of the ongoing tech war.”
Xinhua reported that the Chinese side expressed its thoughts on the US potentially lifting tariffs and sanctions imposed on China, as well as on the fair treatment of Chinese enterprises.
“The two sides agreed to maintain dialogue and communication,” the agency added.
Dow Jones reported on Monday that US President Joe Biden could announce his decision to roll back some tariffs on Chinese imports as soon as this week.
“That leverage theory is actually hurting the interests of American consumers,” said Lu Xiang, a US expert at the Chinese Academy of Social Sciences. “The US is at risk of a recession. Lifting China tariffs would indicate an intention by the Biden administration to solve its livelihood, inflation and recession issues.”
Yellen has maintained her call for the cancellation of some China tariffs in recent months, as US inflation rose to a four-decade high of 8.6 per cent in May.
“They discussed macroeconomic and financial developments in the United States and China, the global economic outlook amid rising commodity prices, and food security challenges,” it said, while referring to the talks as being “part of the administration’s ongoing efforts to maintain open lines of communication”.
The statement added that Yellen raised various issues of concern during the talks, “including the impact of Russia’s war against Ukraine on the global economy, and unfair, non-market [Chinese] economic practices”.
She was also said to be looking forward to future chats with Vice-Premier Liu, though there was no indication of when such talks may transpire.
Chinese envoy expresses concern over US tariffs with Yellen
Mon, July 4, 2022, 10:23 PM
BEIJING (AP) — China’s envoy to trade war talks with Washington expressed concern about U.S. tariffs on Chinese imports during a phone call Tuesday with Treasury Secretary Janet Yellen, the Ministry of Commerce announced, but it gave no indication of progress toward resolving an array of conflicts.
Vice Premier Liu He and Yellen also discussed the global economy and supply chain problems, a ministry statement said.
“The Chinese side expressed concern about issues such as the United States canceling tariffs and sanctions on China and fair treatment of Chinese enterprises,” the statement said.
Trade envoys from the two governments talk regularly by phone and video link but they have yet to announce a date to resume face-to-face meetings.
US seeks China’s help to ease inflation in latest interaction
Published: Jul 06, 2022 12:12 AM Global Times
The US is seeking help from China to ease its economic pressure, hinting that it may ease tariffs on Chinese goods and engage in dialogue with senior Chinese officials more often. However, analysts said Beijing will approach Washington’s overtures with caution, as it is still trying to use the tariffs as bargaining chips rather than sincerely correcting its mistakes that have harmed both sides.
Such frequent communications between senior officials of the two sides show that China and the US are making efforts to manage the differences and competition to prevent escalation caused by miscalculations, while at the same time, the US is trying to seek China’s help to ease the serious inflation the US is being confronted with, analysts said.
Chinese analysts said on Tuesday that although its economy is in disarray, the US is still being provocative in geopolitical issues to contain China. This means the US should not expect China to provide significant support for it to solve its domestic problems. The US tariffs have turned out to have a limited impact on the Chinese economy, and these are just part of the mistakes that the US must correct to bring bilateral ties back on track.
Lü Xiang, a research fellow at the Chinese Academy of Social Sciences, told the Global Times on Tuesday that the US has been forced to engage with China because of its dreadful domestic economic situation.
“Joe Biden now is having a big headache as his approval rating is even lower than his predecessor Donald Trump at the same stage of presidency, which is a great humiliation. The pressure to win the midterms is heavy and serious, so he must find solutions to at least make some changes,” Lü said.
Experts said the main factor that could influence the midterms later this year is the economy, so if the Biden administration cannot deliver some positive changes to ease inflation and gas prices and stop the economic decline, the Democrats are likely to repeat the failure of the Republicans in 2018.
Far from easing tension
According to Bloomberg on Tuesday, Biden may announce as soon as this week a rollback of some US tariffs on Chinese consumer goods – as well as a new probe into industrial subsidies that could lead to more duties in strategic areas like technology.
Although decreasing tariffs on Chinese goods has become an option for the US to solve some of its economic problems, it is still not clear what measures the US government will take next, experts said.
“Decreasing tariffs on Chinese goods is a way to decrease inflation without the danger of hurting economic growth, but the US is not sure about the extent to which the tariff cuts would be effective in controlling price hikes. Therefore, the US government is still worrying about gains and losses and can’t make up its mind,” Gao Lingyun, a trade specialist with the Chinese Academy of Social Sciences in Beijing, told the Global Times on Tuesday.
Bai Ming, deputy director of the international market research institute at the Chinese Academy of International Trade and Economic Cooperation, told the Global Times on Tuesday that “under the US’ general strategy of containing China’s rise, which is unlikely to change in the short term, the US might adjust some of the punitive tariffs on Chinese consumer goods, but at the same time intensify pressure on China, such as increasing sanctions on Chinese tech firms.”
What should China do?
Gao said that China should insist on an reciprocal tariff policy with the US, meaning cutting the same amount of tariffs on US goods if the US reduces tariffs on Chinese products. China should also insist that tariff reductions should bring benefits to both countries, he said.
Bai noted that China should stick to its dual circulation policy, especially focusing on internal circulation so external policies would not affect China’s economy to a great extent.
Chen Jia, a research fellow at the International Monetary Institute of the Renmin University of China, said that market data show that the US economy is deeply bogged down in stagflation, while recessionary risks are increasing, which means the US is still far from reaching a turning point to stop its economic situation from worsening.
“If the US is willing to seize the opportunity to restart China-US high-level communication on the basis of economic cooperation, and move to repair the damage it has caused in the past, China would of course welcome and support those moves. But if the US continues to treat its global partners arrogantly, then it won’t get any help from developing countries including China,” Chen told the Global Times.
Jobs report, China tariffs, NATO expansion: 3 things to watch in D.C. this week
Tue, July 5, 2022, 11:50 AM
President Biden is scheduled to travel to Ohio on Wednesday during a week where the global economy will be in full focus.
From the release of the Fed meeting minutes and jobs report data this week to foreign policy with China and NATO allies, here are three things to watch at the intersection of politics and business:
President Biden may lift some Trump-era tariffs against Chinese goods as early as this week in an effort to bring inflation down, Bloomberg reported.
Treasury Secretary Janet Yellen spoke with her Chinese counterpart Vice Premier Liu He on Tuesday morning in their first meeting since last fall. The two discussed the economic relationship between the U.S. and China as well as tariffs issued four years ago by former-President Trump on billions of dollars worth of Chinese imports.
China’s economy has struggled this year, particularly after the Chinese Communist Party issued lockdowns to deal with a surge in COVID-19 cases.
At the same time, the Biden administration has continued to hold preliminary conversations about an Indo-Pacific trade agreement with U.S. allies and strategic partners in the region.
Taiwan has also pursued a trade agreement with the United States. Taiwan officials have warned that should the U.S. not strengthen economic ties with Taipei, it would be at risk of a Chinese economic takeover, according to Politico.