The failure of two rounds of high-level talks between Chinese and US officials to lower bilateral trade tension has put into jeopardy Boeing (BA) , Qualcomm (QCOM) and other American business interests supported by US President Donald Trump when he visited Beijing last year, analysts including former Australian prime minister Kevin Rudd said.

Liu He, director of the Office of the Central Leading Group for Financial and Economic Affairs, met US Trade Representative Robert Lighthizer, National Economic Council Director Gary Cohn and Treasury Secretary Steven Mnuchin in Washington this week. 

Liu's visit follows another by Chinese State Councillor Yang Jiechi three weeks earlier, which produced little more than standard diplomatic language about "the need to achieve a fair and reciprocal bilateral economic relationship".

No such breakthrough - or progress towards that end - was announced after Liu's meetings wrapped up on Friday.

Neither the US State Department nor the US Trade Representative's office offered any updates as of late on Friday afternoon. The Chinese embassy in Washington declined to acknowledge the visit.

Instead, Liu's stay was marked by Trump's announcement of a plan to place punitive tariffs of 25 percent on steel and 10 percent on aluminium products. China is among countries that supply these metals to US buyers.

That move prompted China's foreign ministry to call on the US to "exercise restraint" in using trade protection tools and warn that any misuse of them would seriously disrupt the international trade order.

"Liu He will be trying very hard [back in Beijing] to pat this down so it doesn't explode, but it's a very volatile cocktail of emotions and political passions in Beijing and in Washington," Rudd said.

Trump's efforts to protect domestic companies from what his administration has considered to be state-subsidised or otherwise unfair competition could derail a US$250 billion package of business deals announced when the US president visited Beijing in November, Andrew Mertha, a specialist in Chinese politics at Cornell University, said.

Trump gets tough on imports.
Trump gets tough on imports.

Many of the components of Trump's deal package are in the form of memorandums of understanding (MOU) and other non-binding agreements.

"The timing of President Trump's announcement may have been satisfying to the China hawks in his administration like [White House adviser] Peter Navarro and Robert Lighthizer, but it comes at a particularly inconvenient time for [President Xi Jinping], whose own controversial steps toward power consolidation are to be further enshrined next week," Mertha said.

Mertha was referring to the announcement of a Chinese government proposal to scrap the two-term constitutional limit on the presidency, opening the way for Xi to stay in power beyond the end of his second term in 2023. The announcement came a few days before the start of an annual meeting of China's legislature.

"Needless to say, Xi does not need the distraction; nor does he want to look weak," Mertha said.

The move to scrap the term limit comes amid fears in the US about China's efforts to acquire advanced US technology for military use and other attempts to undermine America's interests.

"Xi's actions will only play into rising fears about China among Americans, who will further conflate China's leadership with that of other authoritarian regimes like Russia and Turkey," Cheng Li, director of the John L Thornton China Centre at the Washington-based Brookings Institution, said in a report this week.

"Such an atmosphere of distrust can only catalyse further administration aggressions toward China."

And there are more aggressive moves Trump could make.

So far, Trump has held off bringing punitive measures against China as a result of a US government investigation into trade policies that limit foreign companies' access to the Chinese market and force them to turn over intellectual property to their joint venture partners, also known as a Section 301 investigation.

Possible remedies sought by Trump's administration after the 301 inquiry concludes could have a deeper impact than the tariffs on metal trade and would place into jeopardy the world's largest bilateral trading relationship, valued at US$636 billion in 2017, and two-way foreign direct investment worth more than US$250 billion over the past 10 years.

China may not wait for such a move, though, and Beijing may already be preparing to respond to Trump's move against metal imports.

"By way of retaliation, [the Chinese government] could go after American food exports to China, beef exports, Boeing," Rudd said in a Bloomberg Television interview after the White House announcement.

"They could go after lesser things like regulatory complaints being investigated more vigorously against American firms operating in China."

As part of the package of deals the US president trumpeted in Beijing last year, China Aviation Supplies Holding announced an order for 260 narrow-body Boeing jets and 40 wide-bodies.

US chip maker Qualcomm announced non-binding MOUs with Chinese smartphone vendors Xiaomi, Oppo and Vivo - all of them existing customers - to sell around US$12 billion in semiconductors over three years.

As well, the US soybean industry signed two letters of intent with Chinese importers covering a US$5 billion purchase of an extra 12 million tonnes of soybeans in the 2017-18 marketing year.

All of these deals could be at risk in the new, more fractious atmosphere of US-China relations.

"We sometimes assume that in authoritarian political systems like China's [that] politics and political perceptions don't matter," Rudd said. "But when these become matters of national face, then Chinese political leaders are not all that different from other political leaders and they need to be seen to be taking strong and firm action."

-Additional reporting by Zhenhua Lu in Washington

Read the original article on South China Morning Post. For the latest news from the South China Morning Post download our mobile app. Copyright 2018.

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