Human rights sanctions and fallout from raging unrest in Hong Kong would have made a banner week for U.S.-China relations under any circumstances.
Now throw in high-stakes trade negotiations as the two countries stand on the brink of another round of tariff escalation that could further rattle the global economy.
U.S. Trade Representative Robert Lighthizer, President Donald Trump’s chief trade negotiator, is expected to meet Thursday in Washington with Chinese Vice Premier Liu He amid a backdrop of heightened tensions and uncertainties. Liu could leave as early as Thursday night, cutting off talks that were expected over two days.
It's still unclear whether the two sides will be able to agree on confidence-building measures that would halt additional tariff escalation. The Chinese were hoping to get a reprieve on an Oct. 15 tariff increase, but one person close to the talks said that a delay is unlikely to happen based on what China has offered so far.
Here’s what will make negotiators' job harder:
The Trump administration on Monday took long-awaited sanctions actions against human rights abuses in China’s Xinjiang region. Actions included putting 28 Chinese companies and agencies, including some major up-and-coming Chinese firms involved in artificial intelligence, on a U.S. export blacklist.
The export sanctions were followed a day later by the announcement that the State Department would restrict visas for officials suspected of orchestrating repressive actions against Uighur Muslims and other ethnic minorities in the region. The actions were under consideration for months and could have likely been unrolled just ahead of the talks to put pressure on the Chinese.
China responded with a statement saying it would “take all necessary measures to protect China’s own interests.”
U.S. businesses are under increasing pressure to stay quiet about the unrest in Hong Kong or risk their access to China’s lucrative market. The National Basketball Association saw its business ties with China fray after the general manager of the Houston Rockets voiced support for Hong Kong’s democracy movement.
Protests in Hong Kong, which is a territory of China but has an independent judicial and legal system from Beijing, started in response to a proposed bill that would allow extradition to mainland China. The bill has been withdrawn but demonstrations have grown more violent as they evolve into a wider pro-democracy movement.
Trump also grew more assertive over Hong Kong, despite reportedly telling Chinese President Xi Jinping earlier this year that said he would stay quiet on the issue. On Monday, he said he wants a “humane solution” to the unrest there but warned that if “anything bad happened that would be a bad thing for negotiations.”
Beyond the tariffs, the White House is considering other ways to decouple China’s economy from the U.S.
Senior administration officials last week continued internal deliberations on how to potentially restrict China’s access to U.S. capital markets. A meeting last Tuesday at the White House focused on how to prevent U.S. federal retirement funds from being placed in indexes that invest in Chinese state-owned companies accused of being involved in espionage, human rights abuses and industrial policy at the expense of American workers. Other options include delisting Chinese firms from U.S. stock exchanges if they don’t meet U.S. auditing standards.
The deepening imbroglio over Trump’s impeachment inquiry could begin to seep more into the trade talks. Beijing has rejected Trump’s request to investigate his Democratic rival Joe Biden and Biden’s son, but China may also view Trump’s domestic political problems as less of a reason to make concessions on major issues.
“I don’t think China is going to give an inch on any of the structural issues we are demanding,” said Charles Boustany, a former Republican House member who closely tracks trade issues. “With all of this impeachment stuff going on, the Chinese probably sense that Trump is weak and distracted.”