Via Financial Times

Donald Trump’s public call for China to investigate the Biden family has added a new and awkward twist to trade talks with Beijing, possibly jeopardising efforts to reach even a limited commercial ceasefire between the world’s largest economies. 

Liu He, China’s vice-premier, is due in Washington next week for discussions with Steven Mnuchin, the US Treasury secretary, and Robert Lighthizer, the US trade representative, in an attempt to reach a truce after tariff escalations over recent months. 

If no agreement is reached, levies on $250bn of Chinese imports will rise from 25 per cent to 30 per cent on October 15, dealing a new jab to both economies. 

The run-up to the meetings has been overshadowed by the impeachment inquiry that is gripping Mr Trump’s presidency. The probe centres around Mr Trump’s efforts to persuade Ukraine to investigate Hunter Biden, the son of former US vice-president Joe Biden, a top contender for the 2020 Democratic presidential nomination, over his business in the country. 

On Thursday, as Mr Trump sought to defend the pressure campaign mounted by his administration on Ukraine over the issue, the US president asked Beijing to investigate Hunter Biden’s dealings in China as well. By Friday, Mr Trump insisted that his demand for a Biden investigation had “nothing to do” with the trade talks, although the damage might have already been done. 

“A pall of deep suspicion has enveloped the talks before they have even started,” said one person briefed on the negotiations in Washington. “A mini-deal isn’t off the table, but a likely weak set of outcomes for the US is now all the more suspect,” the person added. 

READ ALSO  Is The Narrative All "Priced In"?

Democrats are pouncing on any possible concessions, or watered-down provisions, that Trump administration officials might agree to, and raising questions about what the US president earned in return. “What did [Mr Trump] promise China in exchange for interfering in our election?,” Nancy Pelosi, the Democratic House speaker, wrote on Twitter on Friday. “An easier deal on trade? Ignoring crackdown on Hong Kong’s pro-democracy movement? Condoning repression of religious freedom?” She asked. 

Sherrod Brown, a Democrat on the Senate banking and finance committees, said: “It would be wrong for the president to go easy on China and deny workers a level playing field, in exchange for foreign interference in our democracy. That would be a betrayal of both workers and our values as a nation.”

Officials in both countries had been hoping to make progress on an agreement that would involve higher US farm purchases by Chinese state-owned companies, some greater openness to US investment in China, in areas such as financial services, and some measures to rein in intellectual property theft. The US, in turn, would agree to at the very least hold off on higher tariffs, and possibly roll back some existing ones. 

However, this would fall far short of a comprehensive agreement to permanently reset US trade relations with China and curb many of the trade practices, from forced technology transfer to rampant industrial subsidies and discrimination against foreign companies, that have long strained the relationship with Washington. 

In an interview on Fox Business Network on Friday, Larry Kudlow was optimistic about the looming round of talks, saying the mood had brightened, as China had recently revived some purchases of US farm goods such as soyabeans and pork. “The background music is quite decent right now and it’s improved from where it might have been last summer. I don’t want to predict the outcome. I’m not in the business of that,” he added. 

READ ALSO  SE: OPEC+ Talks Delayed as Divisions Deepen Over Oil Output

Some close followers of US-China relations say the impeachment inquiry against Mr Trump and his demand for an investigation by Beijing of a top domestic political rival did not fundamentally change the reality that the two sides are still far apart on many issues. While the US wants to force an overhaul of China’s economic model, Beijing is digging in against American demands. 

“There are already a lot of obstacles to a major deal, let alone a small one,” said Scott Kennedy of the Center for Strategic and International Studies. “The negotiations were already like a person’s shoelaces. One knot was tied, then another, and then two shoes’ laces were tied together, and the laces became impossible to untie. So what does one more knot in a shoe mean?”

The Chinese government and state-controlled media did not respond immediately to Trump’s comments.

Zhu Feng, a professor at Nanjing University, said the president’s remarks were intended to divert attention from the impeachment inquiry. “(Trump) should go through formal procedures to have China investigate Biden,” said Prof Zhu. “Instead he is using his status as US president to force other countries to find misconducts of his enemy. That is abuse of power.”

A Shanghai-based scholar, who declined to be named, added that Beijing would be reluctant to help Mr Trump undermine one of his rivals. China, he said, would be unlikely to provide evidence, if any exists, of any allegedly questionable business activities involving Hunter Biden: “How could Beijing help Trump get reelected and continue to attack China?”

Victoria Ruan, a China policy researcher at McLarty Associates, said: “I doubt China’s thinking on trade issues will be influenced significantly by this issue at this moment. But given all the uncertainties China will monitor the situation carefully.”

READ ALSO  Banks set to be granted reprieve on US Libor cut-off deadline

While Democrats on Capitol Hill have heavily criticised Mr Trump for his attempt to press China on a Biden investigation, even Republicans who are China hawks have dismissed any concerns that this could interfere in the trade talks.

“There’s the same hope that the administration is going to keep the foot on the pedal and look at ways to keep China accountable. Nothing that was said yesterday changed their directive or their course of action,” one Republican congressional aide said.

Marco Rubio, the Florida Republican senator, doubted that Mr Trump truly meant what he said on China and the Bidens. “I don’t think it’s a real request. Again, I think he did it to gig you guys,” Mr Rubio told reporters.

“I think he did to provoke you to ask me and others and get outraged by it.”

additional reporting by Sun Yu in Beijing