The U.S. stock market, President Donald Trump’s barometer for economic success, has taken a beating in recent months partially fueled, some experts say, by a scorched earth tariff policy that has imposed duties on more than $250 billion of imports from China. | Alex Wong/Getty Images) Trade Trump wants a China deal but negotiators face mounting troubles

High-stakes trade talks between the Trump administration and Beijing will begin Wednesday, just days after the Justice Department unveiled bombshell charges against one of China’s most high-profile companies.

The charges against telecommunication giant Huawei are casting a pall over the possibility of reaching a deal in time for a March 1 deadline — an already lofty goal given U.S. demands that China make deep, structural changes to its state-run economy. If there’s no agreement by then, President Donald Trump says he’ll dramatically increase tariffs on hundreds of billions of dollars’ worth of Chinese goods.


Still, Trump himself has been expressing hope for a deal even as some of his most trusted trade advisers, including China hawk Peter Navarro, have been skeptical or downright hostile to an agreement that would deescalate mounting tariffs.

Navarro “doesn't want a deal, but POTUS wants it and that's all that really matters," a senior administration official told POLITICO this week.

Both countries are facing tough economic outlooks, which could be an impetus to find common ground. Trump also faces what could be a tough re-election fight in 2020 and would want a “win” to tout to voters.

The U.S. stock market, Trump’s barometer for economic success, has taken a beating in recent months partially fueled, some experts say, by a scorched-earth tariff policy that has imposed duties on more than $250 billion of imports from China as well as separate penalties on products ranging from steel to solar panels.

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Prominent American brands like Harley-Davidson and Caterpillar posted miserable fourth-quarter earnings this week, pinning much of the blame on tariffs and worsening trade tensions over the past year.

China is also under pressure to boost its economy after it reported that the last quarter of 2018 had the slowest growth rate since its government began publishing quarterly figures in 1992.

Chinese Vice Premier Liu He, who is leading the talks for Beijing, will meet with Trump in the Oval Office to talk over the status of the negotiations.

Liu and his delegation arrived in Washington late Monday, and they’re expected to come to the table with an armful of counter proposals to U.S. demands made at a previous round of lower level talks in Beijing in early January, a diplomatic source said.

But senior administration officials have been cautious about conveying any false hope.

U.S. Trade Representative Robert Lighthizer, who is leading the talks for the U.S., told House lawmakers in a closed-door meeting earlier this month that there are no plans to extend the 90-day period set by Trump and Chinese President Xi Jinping at a Dec. 1 meeting. After the March 1 deadline, a 10 percent tariff on roughly $200 billion worth of Chinese imports will increase to 25 percent.

Treasury Secretary Steven Mnuchin, who has been more keen to reach a market-calming deal, said he expected progress in talks this week with a “timeline” for a possible deal already mapped out.

"Let me just remind people, we do have another 30 days after this so my expectation is we'll make significant progress at these meetings, but I would just emphasize these are complicated issues," Mnuchin said Monday at a White House press briefing.

On Tuesday, Mnuchin told Fox Business that “everything is on the table” when it comes to possibly lifting the tariffs.

But he cautioned that “the president hasn’t made any decisions on that. There have been no recommendations from the economic team on that yet,” Mnuchin said. “The first step is to make sure we get a good agreement.“

China has already offered to significantly increase its purchases of American agricultural and energy products in a bid to reduce its ballooning trade surplus with the U.S.

Still, Lighthizer and other hardliners in the administration say that doesn’t go far enough. China is expected to make politically difficult changes to policies the U.S. says have led to rampant theft of U.S. intellectual property and forced transfers of technology from U.S. companies — allegations that Lighthizer has used to justify U.S. tariff actions.

Up to this point, sources close to the talks say that China has made little headway in addressing some of those tough requests that have made it difficult for U.S. companies to access China’s massive market.

“None of China's domestic reforms since December have really addressed the structural issues in the relationship,” Nick Marro, Asia and China analyst at The Economist Intelligence Unit said in a note. “Progress on increasing U.S. imports or tackling questions over China's currency don't really address what the USTR is really looking at, which are fundamental market access issues facing US companies.“

At the previous round of lower-level talks in Beijing earlier this month, the exchange primarily consisted of the U.S. running through its demands, said Erin Ennis, senior vice president of the U.S.-China Business Council, which represents major American companies that operate in China.

"All indications are ... that they have not really engaged in detailed negotiations yet,” she said.

If Liu brings something new to the table, "that would presumably be the start of a detailed discussion of what China is willing to do,” she added.

Senate Finance Committee Chairman Chuck Grassley, who is in charge of trade issues in the upper chamber, said while some progress has been made so far between the U.S. and China on trade, he would like to see the two sides to “get deeper into it” than they did during the last round of talks in Beijing. He cited intellectual property issues and trade secret theft, among others.

He also emphasized a need to make sure Beijing follows through during any promises it makes during the negotiations, noting during a conference call with reporters on Tuesday that “we know the Chinese don’t always meet their commitments.”

Complicating the talks is the Justice Department’s announcement Monday of nearly two dozen charges against Huawei, which could make it harder for China to make any concessions.

The U.S. is also seeking the extradition of Huawei CFO Meng Wangzhou from Canada on charges of fraud related to violating U.S. sanctions against Iran.

“I expect that the most controversial element of this effort will be the decision to proceed with a criminal prosecution of Huawei’s CFO when the standard practice in other cases related to sanctions violations have been addressed through civil proceedings,” said Scott Kennedy, a senior adviser and China expert at the Center for Strategic and International Studies.

U.S. officials have denied any overlap between the Huawei cases and the trade talks. However, Meng’s arrest in Canada occurred Dec. 1, the same day that Trump and Xi agreed to try to reach a deal. Charges against Huawei and Meng’s formal extradition request were announced just as the U.S. and China sit down for what could be their most consequential round of trade talks in the past year.

Beijing denounced the Huawei indictment as politically motivated and immoral.

“The United States has been using state power to smear and attack specific Chinese enterprises, destroying the legitimate operations of the companies,” Chinese foreign ministry spokesman Geng Shuang said. “There is strong political motivation and manipulation behind it.”

Ben White, Doug Palmer and Megan Cassella contributed to this report. Teddy Ng, Finbarr Bermingham, Cissy Zhou and Liu Zhen of the South China Morning Post also contributed.

