China seeks to leave Trump twisting in the wind

China has left President Trump twisting in the wind on tariffs, declaring it is not engaged in any negotiation with the U.S. as the tariffs take a political and economic toll on Washington.

Trump and the White House insist the U.S. and China are making progress toward a deal, but they’ve provided no concrete proof. Chinese officials have shot down those claims and chastised the Trump administration's approach.

While markets were up Thursday, the trade war has done economic damage to the U.S. and political damage to Trump.

The S&P is down 10 percent from when Trump was inaugurated, while fears of a U.S. recession have grown. Fears about the power of the dollar have also been on the rise.

Trump’s approval ratings have fallen since the trade war began.

Decision Desk HQ/The Hill showed Trump’s average approval rating above 50 percent for the first days of his presidency, but by late April, his average approval rating had fallen below 45 percent.

The most prominent reason Trump’s approval is falling is the economy, a strength of Trump’s just last year. A Reuters/Ipsos poll released Wednesday found Trump’s approval on the economy at 37 percent, the lowest rating of either of his terms.

Trump has also increasingly signaled a willingness to move on the tariffs, suggesting this week they would be lowered as he came under pressure from a wobbly bond market and warnings from business leaders that the tariffs will lead to empty store shelves in a matter of weeks.

His comments came after Treasury Secretary Scott Bessent told a private meeting of investors on Tuesday that he expects a “de-escalation” in the trade war between the U.S. and China.

This is all likely to give China more leverage in the battle between the world’s two economic heavyweights.

“In this game of chicken, Trump appears to be the more likely of the two to blink, despite his tough rhetoric, as he has shown he will bend in the face of sufficient pressure,” wrote Owen Tedford, senior research analyst at Beacon Policy Advisors, in a Wednesday research note.

Two other factors are Beijing’s relative readiness for this fight, and the fact that Washington and Trump are seen as the instigator of the trade war, a fact that could help China stand strong even if high tariffs in the U.S. do hit its economy.

Tedford said this means Chinese President Xi Jinping “will also be hesitant to be seen as being pressured into a deal, potentially meaning that Beijing is willing to wait out the US or try to force Trump to act unilaterally.”

Trump on Thursday insisted that his team is in talks with China after Chinese Commerce Ministry spokesperson He Yadong said any “claims about the progress of China-U.S. trade negotiations are groundless as trying to catch the wind and have no factual basis.”

He also bashed the media, saying their reporting about the China denials is inaccurate.

“They had meetings this morning and we’ve been meeting with China. And, so I think you have … as usual, I think you have your reporting wrong,” he said adding, “we may reveal it later” when asked who from the U.S. is talking to Chinese counterparts.

Experts say China is pushing back on the idea of active talks to remove the tariffs because Beijing knows the tariffs are unsustainable from a U.S. perspective.

Trump has imposed a 125 percent tariff on China on top of an existing 20 percent tariff. While that tariff will hurt Chinese exporters, it also hurts U.S. consumers and some companies. And it has led to a flurry of retaliation from China that is causing pain in parts of the U.S.

For example, the U.S. Department of Agriculture recently reported China canceled a 12,000 metric tons purchase of U.S. pork.

“There’s obviously some positioning going on here and if you’re the Chinese side, you look at what Trump has done over the last few weeks and I think the only takeaway that they can have is that Trump’s made a huge mistake and he’s kind of fired off all of his weapons at the same time. He’s made threats that even now he can’t possibly maintain and they have him a little bit over a barrel,” said a former House senior national security aide.

Still, the former aide said China will want talks because its economy is built around exports, and it is manufacturing more than it can consume at home.

“I think everybody knows that these short of comically large tariffs, there was no way that either side could maintain them. Americans need to buy toasters and we’re not going to be making them here anytime in the near future. And the Chinese have a huge youth unemployment problem and they need to keep their people working. So everybody benefits,” the former aide said. 

“It’s just that Xi somehow, notwithstanding all the bad things China does, is coming out of the last week looking like a winner and a statesman.”

The CEOs of U.S. retailers Walmart, Target and Home Depot met with Trump on Monday. During the meeting, they conveyed their fears of higher prices for consumers, including during the holiday season at the end of the year, one lobbyist source told The Hill.

“The current tariff rates cannot be sustained in the long term, and the obvious off-ramp is for the two sides to engage in dialogue toward de-escalation. However, the challenge with taking advantage of this opportunity is that American and Chinese leadership disagree on how to initiate these talks,” Tedford said.

Tedford said that in order to break the impasse, Trump may need to either reduce tariffs on China or agree to Beijing’s request for lower-level talks with a specific administration representative. Trump has preferred to conduct talks at a higher level, including discussions between himself and Xi.

“Trump’s continued insistence on being personally involved in starting the negotiations could delay when this happens, even if the U.S. is willing to lower its rates,” Tedford explained, adding that a Chinese leader has not initiated direct discussions with a U.S. president since the Sept. 11 terror attacks. 

“Continued pressure from the financial markets and business community is the most immediate factor that could force Trump to change course. However, the longer he waits, the more visible economic damage could be a growing influence on his thinking.”