Today, we’ll discuss the latest face-to-face trade talks between the world’s two largest economies with Cho Yong-chan(조용찬), director of the America China Economic Research Institute.

The U.S. delegation consisted of economic experts, including representatives from the departments of treasury, agriculture, energy and commerce, as well as senior officials from the White House. All of them are well versed in international trade negotiations. The delegates are believed to know China’s intentions and negotiation tactics better than anyone else. 

From the beginning of talks, the U.S. side pushed strongly for China to specify the exact amount, composition and time frame in regards to its pledge to import more American goods. 

China offered additional trade commitments worth 1.2 trillion US dollars during the Trump-Xi meeting in Argentina in December. At the recent trade talks, the U.S. also demanded that China reveal detailed measures to confirm whether it has actually implemented the plan. Beijing was embarrassed by Washington’s aggressive approach. Even before the trade negotiations began, China began to craft a law governing foreign investment that would prevent the forced transfer of technology. It also decided to temporarily suspend additional tariffs on U.S.-made vehicles starting in January. 

At the trade talks that began on January 7, the U.S. and China were initially expected to probe each other’s strategies and build up to more difficult issues. But instead, it appears both sides have gone all in from the beginning.

The U.S. demanded unilateral concessions from China, while China tried to make as few concessions as possible. The future of the trade war between the two countries depends largely on narrowing their differing views. Therefore, both sides were strongly determined to reach a compromise during the three-day talks.

Both countries have yet to disclose details about points of discussion and agreements made at the talks. But reports say that the two countries discussed seven major issues, with intellectual property protection comprising the largest point of contention. 

According to the Wall Street Journal, U.S. businesses in China sustain an annual loss of 30 billion dollars as a result of forced technology transfer. The U.S. requested China come up with an effective measure to remedy the situation, but China claims that it has never coerced American firms to transfer technology to Chinese businesses. China countered that the U.S. is interfering in China’s domestic affairs. The U.S. wants to block China from challenging its digital supremacy and national security, as seen in the arrest of Meng Wanzhou, chief financial officer of Chinese telecom company Huawei. 

The U.S. suspects that China’s military has illegally collected U.S. technology information through cyber hacking. 

The U.S. has also demanded that China abolish an industrial policy known as “Made in China 2025,” arguing that the large government subsidies that characterize the program run counter to rules of the World Trade Organization. China reportedly said it would consider modifying the policy, but will not abandon it.

It is reported that major agenda items at the U.S.-China trade talks included intellectual property theft, Chinese industrial subsidies and imports of agricultural and energy goods from the U.S.

During the negotiations, it appears that the U.S. focused on the reduction of a trade imbalance through the additional purchase of American goods and services by China.  Other issues highlighted by the U.S. include the abolishment of unfair Chinese trading practices, such as forced technology transfers and infringement of intellectual property, and the exploitation of agricultural and industrial products as a means of trade retaliation against the U.S.

In response, China maintains that it has already eased its trade retaliation against the U.S. by resuming imports of American agricultural goods, including soybeans, and a new Intellectual Property Tribunal was created within the Supreme People’s Court in Beijing.

Before and after the trade talks, China did in fact take some conciliatory measures. These include the suspension of retaliatory tariffs on imported cars from the U.S. and an increase in the purchase of American soybeans. Mr. Cho says the efforts demonstrated by both countries reflect a mutual desire to resolve the trade war.

The World Bank predicts that China’s economic growth will slow to 6.2 percent this year. As a matter of fact, the Chinese economy is not in very good shape. 

700-thousand jobs disappeared in the country last year as a result of its trade war with the U.S. As labor costs rise, foreign and domestic companies alike are moving production outside of China, dealing a blow to investment and employment. Manufacturing, which accounts for one-third of the nation’s gross domestic product, along logistics and the real estate market have all contracted. Even the Chinese government’s ambitious projects related to the fourth industrial revolution, such as AI, robots, electric vehicles and environmentally-friendly industries, are slowing down. 

Last year, about 7.5 million people relocated to rural areas after losing their jobs and 5 million companies went bankrupt, with the number of the unemployed exceeding 10 million. The situation looks pretty serious.

The repercussions of the trade war are also being felt in the U.S. The nation’s manufacturing activity hit a two-year low in December. On the New York Stock Exchange on January 3, Apple, one the U.S.’s most valuable companies, suffered its biggest single-day loss in six years, due partly to the U.S.-China trade row. To ward off additional economic problems, the two countries sought to iron out their differences.

China’s Commerce Ministry said in a statement that the two sides exchanged views in an extensive, in-depth and meticulous way, while establishing a foundation on which to resolve concerns of both sides. The midlevel talks were more about coordinating the two sides’ views on sensitive issues in the run-up to higher-level talks scheduled for mid-January in Washington D.C. It seems there are still differences between the two sides over trade imbalance, intellectual property protection and cyber attacks. The U.S. and China will have to address those and other issues at future talks.

After the three-day trade negotiations, both the U.S. and China said that the talks made progress. On January 9, U.S. officials emphasized China’s agreement on additional purchases of American products and services as well as wider access to the Chinese market. The Commerce Ministry in China, meanwhile, said in a statement on January 10 that the two sides have built a mutual problem-solving framework. Still, there is much to discuss in the future, as Mr. Cho explained.

One of the most contentious issues is China’s industrial policy. To the U.S., the policy runs counter to established international norms on trade and commerce. But to China, it is simply a matter of economic growth. For that reason, many analysts say that it will not be easy for the two sides to find a significant breakthrough.

Although the recent trade talks proceeded smoothly, conflict between the U.S. and China will likely continue. The trade war is only a part of a larger strategic rivalry. Even if they manage to resolve issues like trade imbalance and non-tariff barriers, the battle for hegemony will continue. If negotiations do not move forward within the 90-day truce period, both economies, along with global trade overall, will be hit hard. 

This year, the U.S. and China mark the 40^th anniversary of establishing diplomatic ties. The two countries should mitigate potential risks during the trade truce period and prevent their conflict from worsening

The trade war between the U.S. and China may intensify if key agreements are not made by March 1, when the truce is scheduled to end. Attention turns to whether the two countries will be able to hammer out their differences and mitigate conflicts in the future.