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US, China wield threats going into high stakes trade talks

Industries including electronics that the Communist Party is promoting as China's economic future have suffered declines of up to 40% in sales to the United States


U.S. and Chinese negotiators are to resume trade talks Thursday just hours before the United States is set to raise tariffs on Chinese imports in a dramatic escalation of tensions between the world’s two biggest economies. 

In Beijing, Chinese officials said they will retaliate if President Donald Trump goes ahead with more tariff hikes, adding to the heated rhetoric from both sides that was shaking stock markets around the world.

The talks starting up again in Washington were thrown into disarray this week after top U.S. trade negotiator Robert Lighthizer and Treasury Secretary Steven Mnuchin accused the Chinese of reneging on commitments they’d made earlier. In response to the alleged backsliding, the United States is raising tariffs on $200 billion in Chinese imports from 10% to 25% at 12:01 a.m. Eastern time Friday.

The two countries are sparring over U.S. allegations that China steals technology and pressures American companies into handing over trade secrets, part of an aggressive campaign to turn Chinese companies into world leaders in robotics, electric cars and other advanced industries. The setback was unexpected. Through late last week, Trump administration officials were suggesting that negotiators were making steady progress.

Electronic industry players have suffered

U.S. officials are insisting that any deal be strictly enforced so that China lives up to its promises – something they say Beijing has repeatedly failed to do in the past. Also unclear is what would happen to the U.S. tariffs on Chinese imports. China wants them lifted; the U.S. wants to keep tariffs as leverage to pressure the Chinese to comply with any agreement.

Despite the bluster, factories in Chinese coastal regions that serve the U.S. market have been devastated. Industries including electronics that the Communist Party is promoting as China’s economic future have suffered declines of up to 40% in sales to the United States. That has increased pressure on President Xi Jinping, who political analysts say faces criticism within the ruling party that he has failed to manage Trump. Chinese exports to the United States plunged 13% from a year ago in April and are off 9.7% since the start of 2019. Total Chinese exports sank 2.7% in April, far weaker than forecasts for growth in low single digits. Imports of American goods, meanwhile, tumbled 26%.