BOFIT Viikkokatsaus / BOFIT Weekly 2019/23

China released a white paper last Sunday (Jun. 2) accusing the US of walking away from the current round of trade negotiations and making unreasonable demands on China. In response to the hikes in US import tariffs that went into effect on May 10, the Chinese raised countermeasure tariffs on US imports, effective June 1 (see BOFIT Weekly 20/2019). Over the past weeks, exchanges between the two countries have heated up and moved from targeting goods to specific businesses.

It remains unclear as to whether the countries plan to resume talks when their presidents meet at the G-20 summit at the end of the month. The negotiation stakes have risen since president Donald Trump in mid-May banned US firms from using telecom equipment that posed a threat to national security. In practice, the ban was directed at Chinese technology giant Huawei. Furthermore, the US commerce department banned firms from doing business with Huawei without first obtaining a special permit. While this effectively halts deliveries to Huawei of critical components and systems, products already in existence have been given a 90-day extension as of May 20.

China’s commerce ministry plans to release its own list of “unreliable firms and persons” and national development and reform commission (NDRC) suggested the country may consider export restrictions on rare earth metals if products made from them are used against China. In addition, officials have asked Chinese tourists and students planning to go to the US to reassess carefully the risks involved, and warned Chinese companies operating in the US to prepare for increased harassment from law enforcement officials. Moreover, Chinese news coverage has recently grown critical of the US.