China Poised to Play Hardball in Geneva Trade Talks as Economic Pain Allows for Tough Stance

Strategic Insights -

The upcoming Geneva trade talks between China and the United States are expected to be a crucial moment in de-escalating the trade tensions that have plagued the world's two largest economies for months. China's ability to withstand economic pain and its vast domestic market are expected to give it an upper hand in the negotiations, allowing it to play hardball with the US. Beijing has shown a more mature response to the US tariffs, using its significant production of processed rare earth minerals and its control of key technologies to its advantage.

China's core strengths going into the talks are its huge domestic market, as well as "key technologies and control of a significant proportion of processed rare earth minerals", according to Chong Ja Ian, associate professor of political science at National University of Singapore. Compared to its approach during Trump's first term, Beijing's response to his tariffs this time has been "more mature", said Dylan Loh, an assistant professor at Singapore's Nanyang Technological University.

Key Takeaways:

  • China's vast domestic market and control of key technologies give it an upper hand in trade negotiations with the US.
  • Beijing's response to US tariffs has been more mature, using key strengths to its advantage.
  • China has the ability to withstand economic pain, allowing it to take a hardline posture in trade talks.
  • Beijing has launched a charm offensive aimed at tightening trade ties in Southeast Asia and Europe.
  • China's autocratic system allows it to absorb economic pain in ways democracies often cannot.
  • The upcoming Geneva trade talks are a crucial moment in de-escalating trade tensions between China and the US.
  • Beijing is expected to insist on the removal of all US tariffs as a condition for a trade deal.
  • Analysts agree that the talks are a first step towards a de-escalation of tensions that could, a long way down the line, lead to a lifting of tariffs.
  • Beijing could insist on receiving the same 90-day waiver on tariffs that other countries had received.

Statistics:

  • China's domestic market and control of key technologies give it a significant upper hand in trade negotiations with the US.
  • Sales of Chinese goods to the US last year totalled more than $500 billion, 16.4% of the country's exports, according to Beijing's customs data.
  • US shipments to China last year totalled $143.5 billion, according to the US Trade Representative website.
  • Cumulative duties on some Chinese goods are as high as 245%, with tariffs reaching as high as 145%.
  • China's factory activity shrank in April, with Beijing blaming a "sharp shift" in the global economy.

Sources:

  • Chong Ja Ian, associate professor of political science at National University of Singapore, told AFP.
  • Dylan Loh, an assistant professor at Singapore's Nanyang Technological University, told AFP.
  • Lizzi Lee, from the Asia Society Policy Institute's Center for China Analysis, told AFP.
  • Teeuwe Mevissen, senior China economist at Rabobank, told AFP.
  • Shehzad Qazi, managing director of China Beige Book, told AFP.
  • Ryan Hass, senior fellow at Brookings Institution, told AFP.
  • Dan Wang, China Director at the Eurasia Group, told AFP.