US-China Tariff War Negotiations Open... Tensions Eased but Big Deal Unlikely

US Treasury Secretary Scott Besant and US Trade Representative (USTR) Representative Jamison Greer announced on the 6th (local time) that they would meet with the Chinese delegation in Switzerland this weekend, drawing attention to whether the US-China tariff war can find a breakthrough.

○Cautious US

On this day, the US and China each disclosed their meeting plans, but there were subtle differences in the content. Secretary Besant stated in a press release that he would visit Switzerland to meet with the Chinese chief representative (He Lifeng, Vice Premier of the State Council of China) and expressed hope for productive dialogue while working to realign the international economic system to better suit US interests.

Representative Greer did not mention meeting with the Chinese side but said, "We are negotiating with other countries to rebalance trade relations, achieve reciprocity, open new markets, and protect US economic and national security." The overall context points to 'tariff negotiations,' but direct mention was avoided.

Secretary Besant explained in a Fox News interview that the two sides would meet on the 10th-11th, focusing more on "easing tensions" rather than the trade negotiations themselves, as both sides share a common interest in the unsustainability of current tariff levels.

On the other hand, the Chinese side used more direct expressions, clarifying their readiness for confrontation. The Chinese Ministry of Commerce stated, "Recently, high-level US officials have continuously spread rumors about tariff adjustments and voluntarily provided information to China through various channels, hoping to discuss issues such as tariffs with China," and "We agreed to contact the US, fully considering the world's expectations, China's interests, and the appeals of US industries and consumers."

They also argued that "any dialogue and negotiation should be open under the premise of mutual respect, equal consultation, and reciprocity," and that "if negotiations are used as a guise for threats and intimidation, China will never respond."

○Aggressive China

The opening of dialogue between the two countries, which had been engaged in a battle of pride, is interpreted as a result of continuous requests from the economic sectors of both countries. Companies like Walmart, Target, and Home Depot demanded an end to the tariff war, warning that goods would disappear from shelves and bankruptcies would surge. The situation where major ports like Seattle in the US were left empty due to the absence of Chinese cargo ships was also a factor. The Chinese economy, pressured by export declines and domestic slowdown, was also in a difficult position to hold out indefinitely.

President Trump is still making bold statements. At a joint press conference with Canadian Prime Minister Mark Carney at the White House, he argued that "not trading with China benefits the US." He claimed that the US trade deficit with China is $1 trillion (about 1,395 trillion won), saying, "Their (China's) economy is suffering greatly without trading with the US, and we are not losing $1 trillion in any way."

While outwardly claiming that 'negotiations are fake news (China)' and 'not trading is beneficial to us (US),' it seems both sides have been steadily communicating behind the scenes. As concerns from companies over sudden supply chain disruptions and consumer dissatisfaction due to rising prices grew, President Trump mentioned at least three times since the second half of last month that tariffs on China could be lowered. This created an atmosphere where the Chinese side could come to the negotiating table while maintaining their pride.

President Trump's abandonment of his approach of preferring summit meetings and demanding a call to Chinese President Xi Jinping is also seen as having positively contributed to the success of the dialogue. On the 24th of last month, a figure presumed to be a high-ranking Chinese official was spotted entering the US Treasury building.

○Ultra-high Tariffs Likely to Decrease

The possibility of a 'big deal' being concluded between the two countries in a few meetings is not high. Eswar Prasad, a professor at Cornell University, told the New York Times (NYT), "The likelihood of a comprehensive trade agreement is low, but even easing tensions itself could bring economic and political benefits to both governments."

President Xi and President Trump have already exchanged blows over the tariff war during the first Trump administration. At that time, the two countries temporarily reached an agreement after exchanging tariffs and retaliatory tariffs, but soon resumed imposing tariffs, accusing each other of not keeping promises. Even if both sides agree on major goals such as 'reducing the US trade deficit with China,' conflicts could erupt again at any time during the implementation process.

The level of negotiations desired by the US has risen compared to the past, and China's size has grown compared to the past, making it difficult to reach an agreement. However, there is considerable room for ultra-high tariffs, which were at the level of trade severance, such as 125%, to be lowered to a more realistic level in this process. For companies, this is a point where they can buy some time.

The market is in a skeptical mood. The US stock market, which had been on a downward trend due to Secretary Besant's statement at a congressional hearing that "talks with China have not officially started," rebounded as the meeting plans were disclosed. However, with the Federal Reserve's monetary policy decision meeting scheduled for the 7th expected to remain unchanged and concerns about tariff policy persisting, the S&P 500 index closed slightly lower, down 0.77%.

Washington Correspondent Lee Sang-eun selee@hankyung.com