Senior Treasury officials are holding a final round of talks with a new round of economic volatility on the horizon.

The Biden administration is making a final push to reinforce the communication channels it established between the United States and China before the relationship between the world’s largest economies potentially faces fresh upheaval when President-elect Donald J. Trump takes office next month.

A team of senior Treasury Department officials will travel to Nanjing, China, this week for a final meeting of the U.S.-China financial working group. A separate group of Treasury officials will convene with their Chinese counterparts on the sidelines of a Group of 20 gathering in South Africa this week for a meeting of the bilateral economic working group. The working groups were formed in 2023 as a way to prevent tension between the U.S. and China from devolving into economic warfare.

The officials are expected to discuss a familiar range of issues that have been on the table since the new structure for economic dialogue was created last year. The United States is expected to raise its continued concerns about China’s excess production of green energy technology, which is flooding global markets. Treasury officials are also expected to raise issues with China’s recent restrictions on exports of critical minerals and the support that Chinese firms have been providing to Russia in its war against Ukraine.

“The United States and China are the two largest economies on the globe, and the American people expect that we should be able to communicate directly with Chinese officials on both areas where we agree and especially on areas where we don’t,” said Jay Shambaugh, the Treasury Department’s under secretary for international affairs, who will be participating in the meetings.

Treasury officials say that the increased engagement has given the United States a better understanding of China’s economy and how its policymakers view sensitive issues such as foreign exchange policy and international debt relief. They also point to regular “technical exercises” that the two sides have been conducting to help maintain financial stability in the event of a crisis as a channel that will be valuable in the future.

Despite the warmer tone between the two countries, most of the Biden administration’s warnings about China flooding global markets with cheap solar panels and electric vehicles have gone unheeded. There has also been no indication that Chinese firms have stopped helping Russia access the technology that it needs to restock its military. And the U.S. and China have continued to ratchet up protectionist measures.

The Biden administration opted this year to maintain the tariffs that the Trump administration had imposed on billions of dollars’ worth of Chinese imports and announced new tariffs on Chinese electric vehicles, solar cells, semiconductors and advanced batteries.

This month, the United States unveiled broader restrictions on advanced technology that could be sent to China, to prevent it from developing its own advanced chips for military equipment and artificial intelligence.

China responded last week with new restrictions of its own, banning the export of several rare minerals to the United States that are used to make valuable products, like weaponry and semiconductors.

The escalations raise questions about what the new lines of communication have actually accomplished, but proponents of more dialogue argue that without them the economic relationship could be even worse.

“U.S. and Chinese financial officials are under no delusions that relations are fraught,” said Mark Sobel, a longtime former Treasury official. “But whether they like each other or not, they absolutely should be speaking with one another, if for no other reason than to avoid potentially harmful misunderstandings.”

Mr. Sobel, the U.S. chairman at the Official Monetary and Financial Institutions Forum, added: “With a new administration coming in, there is all the more reason to continue these important dialogues.”

Economic tension between the U.S. and China is expected to rise under Mr. Trump, who imposed tariffs on more than $300 billion of Chinese imports during his first term and formally labeled China a currency manipulator. This year, Mr. Trump said he would enact an extra 10 percent tariff on all products from China and he has suggested removing permanent normal trading relations with China, which would result in an immediate increase in tariffs on Chinese imports.

The Biden administration hopes that the communication structure that it put in place will help stabilize the economic relationship with China if a new period of volatility emerges. The two economies account for over 40 percent of global gross domestic product and collaborate on policy matters including financial stability, debt relief for poor countries, sanctions and the governance of the World Bank and the International Monetary Fund.

However, Mr. Trump has demonstrated that he has a different view of economic diplomacy.

During his first term, Mr. Trump did away with the “strategic economic dialogue” format that former Treasury Secretary Henry M. Paulson Jr. had put in place during the George W. Bush administration. Instead, he imposed tariffs as a negotiating tool and dispatched his top economic advisers, Steven Mnuchin, who was his Treasury secretary, and Robert Lighthizer, his trade representative, to negotiate a trade agreement. The deal was signed in 2020 but the terms were not honored.

Michael Pillsbury, who served as Mr. Trump’s top outside adviser on China during his first term, said that meetings among midlevel American and Chinese officials tend to be fruitless because they have little authority to make major policy decisions. He said that he expected that Mr. Trump would have little patience in such a format and that he instead would focus on direct talks with President Xi Jinping.

“It’s part of the American ‘feel good’ approach that just to have the meeting is a good thing,” Mr. Pillsbury said. “I think President Trump will return to the single-channel approach, that all main issues are between him and Xi Jinping.”

Alan Rappeport is an economic policy reporter, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters. 

Source: https://www.nytimes.com/2024/12/11/us/politics/us-china-ties-trump.html