US team divided as trade talks with China begin

China and the US have launched their latest high-level negotiations to avert a trade war between the world’s two largest economies. But there are growing questions in Washington over Donald Trump’s dealmaking acumen and persistent signs of his administration’s internal divide over how best to deal with Beijing. 

Chinese officials are hopeful that Liu He, Xi Jinping’s top economic adviser, can leave Washington this weekend with a deal that would spare ZTE, the Chinese telecoms equipment manufacturer, from a corporate death sentence.

ZTE suspended its shares from trading in April and said it had halted operations earlier this month as a result of the US ban on it sourcing vital parts from US suppliers, following allegations it sold restricted equipment to Iran and North Korea.

But after flagging his support for measures that would save ZTE on Twitter last weekend, Mr Trump has been forced to defend himself against both Republicans and Democrats in Congress who said his U-turn meant he was siding with a Chinese group against US authorities.

ZTE has admitted violating US sanctions on Iran and North Korea and has long been a focus of suspicion for US intelligence agencies. 

The talks begin in earnest on Thursday against a backdrop of continuing divisions between senior officials eager to strike a deal, such as Treasury secretary Steven Mnuchin, and China hawks, such as White House trade adviser Peter Navarro, according to people familiar with the administration’s internal discussions.

The White House on Wednesday initially said Mr Mnuchin, Commerce secretary Wilbur Ross and US trade representative Robert Lighthizer would lead Thursday’s discussions with Mr Liu and his delegation.

It only later added that Mr Navarro and National Economic Council chair Larry Kudlow, another vocal critic of China’s trade policies, would join them. 

People briefed on an initial round of negotiations in Beijing earlier this month said that Mr Mnuchin and Mr Navarro clashed during those talks over a one-on-one meeting scheduled between the Treasury secretary and Mr Liu with Mr Navarro objecting to being left out. 

One person briefed on the first round of talks in Beijing said Mr Navarro made it clear that he was “aggressively opposed” to a suggestion that Mr Mnuchin meet individually with Mr Liu.

But the person added that it was not clear if the Chinese registered the angry exchange as the Americans were huddled on the other side of the room. “Peter has a hot temper,” added a second person familiar with the incident. 

The clash does not seem to have diminished Mr Mnuchin’s desire to put his stamp on the discussions with Beijing or China’s appetite for treating him as their lead interlocutor. 

According to a copy of China’s official schedule for Thursday’s meetings seen by the Financial Times, Mr Liu, who met with congressional leaders on Wednesday, is due to hold additional one-on-one meetings with Mr Mnuchin and also join him for a private dinner. 

A Treasury spokesman did not immediately respond to a request for comment. But Chinese officials complained before the Beijing talks that they did not know whom to engage with after Mr Trump decided to send seven senior officials. 

Before this week’s talks, Chinese officials complained that the bickering on the US side had made already difficult talks more complicated. In addition, they made clear to US officials that they would prefer Mr Navarro not be involved, according to one person briefed by the Chinese side. 

But the public pledges from Mr Trump and other senior US officials to try to find an alternative to the outright ban that drove ZTE to suspend operations last week has also changed the tenor of this week’s talks.

In particular, Beijing is ready to announce significant new purchases of US exports, such as liquid natural gas, to try to reduce the US’s $337bn annual trade deficit with China, as Mr Trump has demanded, if progress is made on ZTE. 

“The Chinese delegation has come bearing gifts that they can now proffer without losing face,” said Eswar Prasad, a Cornell University economist and China expert. 

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US team divided as trade talks with China begin

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