China-US trade faces new threats in 2022, with no new deal in sight

  • China
  • Tuesday, 08 Feb 2022

Page Mill Winery sold 12,000 bottles of its zinfandel-cabernet-petite shirah blend of wines to China every year from 2015-18. Back then, Chinese consumers paid just US$30 to US$40 per bottle.

But when the US-China trade war broke out in 2018, China slapped tariffs on American wines, and this pushed prices up by US$10 per bottle, according to winery owner Dane Stark.

He quit selling to China because of the tax, eliminating about one-sixth of the suburban San Francisco winery’s annual business.

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“When a case lands in China, it doubles in price,” he said. A case contains 12 bottles. “On top of the cost to produce it, that tariff changes the financial formula.”

Page Mill Winery and countless other companies across the United States are now staring into an unsettling abyss in the trade dispute, and analysts say the situation probably will not improve this year as the two sides remain too distant and have other priorities.

‘Clear’ China hasn’t met trade deal, but ‘unflinchingly honest’ talks ongoing

The US still counts China as its top goods-trading partner, with US$164.9 billion in exports to the Asian economic giant in 2020 and US$450.4 billion coming from the Chinese side, according to US trade data.

American companies prize China for its massive market and as a base to manufacture some of the world’s top-selling goods, from iPhones to General Motors cars.

The trade dispute that grew out of former US president Donald Trump’s quibble over his country’s trade deficit with the other side saw tariffs placed on a total of US$550 billion worth of goods, including US$350 billion originating in China. The dispute further strained wider two-way relations and has extended into President Joe Biden’s term, for lack of a resolution.

An Economic and Trade Agreement, signed in January 2020 as an initial answer to the dispute, expired on December 31. Further straining Sino-US trade ties, China met less than two-thirds of the import-purchasing goal specified in the trade deal, according to an analysis by Chad Bown, a senior fellow with the Peterson Institute for International Economics, a research organisation in Washington.

“I’m sure both sides are looking at various things they can do ratchet up pressure on the other,” said Doug Barry, communications vice-president with the US-China Business Council, a 265-member advocacy group in Washington. Each side could raise import tariffs, he said, while flagship American companies could face heat in Congress to tone down business in China.

Trade ties will wobble for a while as China is focused on the Winter Olympics and the upcoming “two sessions” legislative meetings in March, Barry forecast.

Additionally, US congressional races later this year could put more Republicans in Congress, he added, and those lawmakers generally take a dimmer view on China than the Democrats do. Democrats currently have a slight majority in the House of Representatives.

It may turn out that China takes no concrete action to appease the US, analysts say. Officials in Beijing could instead wait until Biden clarifies his side’s position in the trade dispute, some believe.

“If the US-China trade war is to be resolved, then the Biden administration has to make clear what its expectations are of China,” said Jayant Menon, a visiting senior fellow with the ISEAS Yusof Ishak Institute’s Regional Economic Studies Programme in Singapore.

US money or Chinese public’s fury: the stark choice for China’s apparel firms

“The phase-one deal was not adhered to but was negotiated by the previous administration,” Menon said. “A new deal is required, but the US has to want to make such a deal and lead the way since it started the war.”

A US Trade Representative statement said on Friday that the US was talking to China about fulfilling its commitments to the expired trade deal. China failed to meet its purchase commitments in 2020 and probably last year, the statement said.

“We see this engagement as providing China with an opportunity to demonstrate that it is serious about working to promote stability and fairness in our bilateral trade relationship,” it said. “This administration will defend America’s economic interests from Beijing’s harmful policies and practices by using the full range of tools we have, and by developing new tools as needed.”

US Trade Representative Katherine Tai said at a virtual forum in early January that the United States, with the European Union, could turn attention to China’s “harmful non-market practices” in aerospace trade.

Her office is also considering tariff exclusions for certain Chinese imports, and 140 lawmakers wrote a letter on January 20 imploring her to expand the list for the sake of American companies.

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