Trade War Erupts: Why are US-China Trade Negotiations Stalled?

According to sources familiar with the matter, negotiations between China and the United States on trade and other issues have reached a stalemate, with both sides talking past each other and failing to reach a consensus on the best way forward. The Chinese side has accused the U.S. of not clearly stating what specific measures they want Beijing to take in combating fentanyl, while the U.S. has countered by listing at least three demands they have communicated to Beijing.

Since taking office as President of the United States, Donald Trump has imposed two rounds of tariffs totaling 20% on all Chinese goods, citing China’s failure to prevent fentanyl from entering the U.S. Beijing has retaliated with its own measures in response. The Trump administration claims that China manufactures opioid products that enter the U.S. via Mexico and Canada, causing approximately 75,000 American deaths annually, and this situation must be addressed.

Despite China imposing retaliatory tariffs on some U.S. goods, they are also seeking for Trump to rescind the tariffs. Sources have revealed that while contacts have been made between representatives of both countries, Chinese officials have indicated that the U.S. has not outlined what specific actions they want China to take on the fentanyl issue in exchange for lifting the tariffs.

One individual familiar with the situation disclosed that Trump’s team has rejected claims that they did not make clear demands regarding fentanyl, noting that messages have been sent to Beijing, including through diplomats like Ambassador Cui Tiankai. The messages reportedly include demands for China to halt the shipment of drug precursor chemicals to Mexico, impose the death penalty on traffickers, and require the party-controlled People’s Daily to publish articles condemning fentanyl trafficking on its front page.

The third demand from the U.S. may pose difficulties for China, as the People’s Daily typically reserves that space for reporting on Party Leader Xi Jinping. Disagreements between the two sides, including whether the U.S. has made clear demands on fentanyl, indicate a fundamental mismatch in handling diplomatic affairs between Trump and Xi. Trump has personally engaged in negotiations on trade issues with U.S. partners Canada and Mexico, while Beijing prefers resolving most detailed issues before allowing Xi to speak with Trump over the phone.

White House officials have stated that the U.S. has clearly communicated its expectations. Both the U.S. Treasury and Commerce Departments did not respond to requests for comment from Bloomberg.

Trump’s timing of the two waves of tariffs on China has also irked Beijing. The first round fell during the Chinese New Year holiday when most government officials were on vacation. A source mentioned that the second round coincided with the opening of the annual legislative sessions of the Chinese People’s Political Consultative Conference and National People’s Congress, seen as sending a negative signal.

Trump has sent mixed signals regarding his China policy, actively using tariffs while also suggesting that a deal with China is possible.

Efforts by the Chinese government to establish a communication channel between Foreign Minister Wang Yi and U.S. National Security Advisor Mike Waltz have been made, akin to arrangements during the Biden era. However, when Wang Yi visited New York to attend a United Nations meeting last month, the Trump administration did not reach out to him. Beijing views this as a missed opportunity to establish an important backchannel for communication.

Beijing Foreign Ministry adviser Wu Xinbo expressed frustration about the inability to establish a reliable communication link. Trump had previously highlighted fentanyl as a “drug war” started by the Chinese Communist Party (CCP), pressuring China to stop the flow of drugs into the U.S. The issue of combating fentanyl has also become a key topic during Biden’s administration, seeking cooperation from China.

During Trump’s second term, two rounds of tariffs were imposed on China concerning the fentanyl issue. China released a white paper on fentanyl substances control on March 4, outlining specific steps to combat fentanyl to assure the U.S. that Beijing has been addressing drug flows into America.

Yet on April 16, 2024, the U.S. Congressional-Executive Commission on China published a report revealing how the CCP plays a role in the proliferation of fentanyl in the U.S. The extensive investigation exposed seven alarming findings, demonstrating how China covertly assists the outward export of fentanyl materials and synthetic drugs through direct subsidies and incentives.

The report indicated that this is a “drug war” waged by the CCP against the U.S. It also discovered that while China publicly pledges cooperation in combating fentanyl exports, when the U.S. seeks assistance, they discreetly tip off Chinese companies targeted by the U.S.