The United States and China appeared at a deadlock over trade negotiations on Sunday as Washington demanded promises of concrete changes to Chinese law and Beijing said it would not swallow any “bitter fruit” that harmed its interests.

The trade war between the world’s top two economies escalated on Friday, with the United States hiking tariffs on $200 billion worth of Chinese goods after President Donald Trump said Beijing ‘broke the deal’ by reneging on earlier commitments made during months of negotiations.

White House economic adviser Larry Kudlow told Fox News on Sunday that the United States needs to see China agree to “very strong” enforcement provisions for an eventual deal and said the sticking point was Beijing’s reluctance to put agreed changes into law.

He vowed the tariffs would remain in place while negotiations continue.

Beijing remained defiant, however. “At no time will China forfeit the country’s respect, and no one should expect China to swallow bitter fruit that harms its core interests,” said a commentary, due for Monday publication, in the ruling Communist Party’s People’s Daily.

It said Beijing’s doors were open to talks but it would not yield on important issues of principle.

Kudlow said there was a “strong possibility” that Trump will meet with Chinese President Xi Jinping at a G20 summit in Japan in late June. Until last week, there were expectations Trump and Xi would sign a trade deal at the summit. (more…)

In an unusual move, the Chinese delegation has come clean to the domestic press about Beijing’s remaining trade-deal related demands, exposing steep divides that could make it a final deal impossible for Trump, who has repeatedly said he will only accept a “great” deal.

Unsurprisingly, Liu He, the leading Chinese trade negotiator, confirmed what Beijing has intimated time and time again:

That without the complete removal of all trade-war related tariffs, Beijing will not remorse a deal.

The other two demands were related to American commitments to buy Chinese goods, something that could also pose a problem.

In a wide-ranging interview with Chinese media after talks in Washington ended Friday, Vice Premier Liu He said that in order to reach an agreement the U.S. must remove all extra tariffs, set targets for Chinese purchases of goods in line with real demand and ensure that the text of the deal is “balanced” to ensure the “dignity” of both nations.

Underscoring the parlous nature of the negotiation, Representative Robert Lighthizer said on Friday that the administration is planning to release details of its process for imposing tariffs on $300 billion in Chinese imports. The move will likely have the desired effect: Communicating that Trump doesn’t plan to yield on what’s left of his core demands.

For those keeping track, here’s a timeline courtesy of Rabobank.

But as campaigning for the upcoming presidential vote ramps up, the administration will need to carefully consider the pressure on the American consumer that might become a factor if the price of all goods flowing into the US from China is forced higher due to the additional tariffs.

In his interview Liu said both sides agreed to keep talking despite what he called “some temporary resistance and distractions,’’ and to hold future meetings in Beijing. He dismissed the idea that talks had broken down. “It’s normal to have hiccups during the negotiations. It’s inevitable.”

Liu also struck a note of defiance. “For the interest of the people of China, the people of U.S. and the the people of the whole world, we will deal with this rationally,” the vice premier said.

“But China is not afraid, nor are the Chinese people,” adding that “China needs a cooperative agreement with equality and dignity.”

Ultimately, respecting national sovereignty was a major theme in the talks. but whether Trump is willing to make these concessions and risk looking weak before the man who is emperor of one-fifth of the world’s population.

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