The odds of a breakthrough in upcoming trade talks with China took a turn for the worse this week after the Trump administration imposed a series of new sanctions on Beijing for alleged human rights violations.
On Monday night, the Department of Commerce added 28 Chinese companies to its "entity list", which blocked them from buying US products.
"These entities have been implicated in human rights violations and abuses in the implementation of China's campaign for repression, mass arbitration and high-tech surveillance against Uighurs, Kazakh hawks and other members of Muslim minority groups," the agency wrote in the federal registry.  The day after Secretary of State moved Mike Pompeo imposed travel ban on government leaders and Communist Party officials, claiming to be accomplices in human rights violations.
A Chinese spokesman for the Department of Commerce declined say that the United States should "immediately stop making irresponsible efforts acknowledgments "and" stop interfering with … China's internal affairs, and remove relevant Chinese entities from the list of entities as soon as possible. "
The spokesman also warned that China would take" all necessary measures "to protect its interests.
Ratcheting of tensions between the world's two largest economies came as Washington prepares to host a Chinese trade delegation led by Vice Prime Minister Liu He on Thursday to revive trade talks.
A lack of progress in the negotiations would prolong a season plus trade conflict that has already cut economic growth in the United States and around the world, while a setback will increase odds new tariffs or increases on those dating back to July 2018.
None of the scenarios would bode well for President Trump Donald John TrumpTrump campaign slams Minneapolis mayor, Target Center & # 39; attempt to extort them with rally security costs Susan Rice calls Trump decision on to withdraw troops from Syria's "batshit crazy" Ex-Trump officials met Zelensky's campaign assistants at Trump hotels earlier this year: reports MER heading into an election year in which economists are predicting a slowdown in growth.
Thursday's negotiations had been seen as an opportunity to scale down a trade war that has led to tariffs on billions of dollars of merchandise traded and taken a bit of global economic growth.
Managing Director of the International Monetary Fund Kristalina Georgieva said Tuesday that growing trade war could eat up as much as $ 700 billion in global economic activity by the end of 2020, right around election day in the United States
losing in a trade war, "said she. "Global trade growth has almost stopped."
On Tuesday, markets fell on news of new US tensions with China, with the Dow Jones Industrial Average closing 314 points, or 1.2 percent.
The ongoing conflict with China also reduces the prospects for US growth. A survey of business economists predicted 2.3 percent growth this year, followed by 1.8 percent in 2020 – well below Trump's campaign promise of 3 percent annual growth.
After a major summer boom that led to an increase in tariffs, the Trump administration and China had spent much of September making goodwill moves to set the tone for the October talks.
Beijing began buying US soybeans, and Trump agreed to postpone the planned tariff increase scheduled on October 1.
Gary Clyde Hufbauer, a non-resident senior fellow at the Peterson Institute for International Economics in Washington, said there may be an upside to the recent bounce on security issues.
"As I see it, we are beginning to differentiate between normal trade and security issues," he said. "Trump could even appoint separate dealers for the security track."
The Trump administration, he noted, has continuously mixed the two questions, at times by using security-related sanctions against Chinese telecom giant Huawei to influence trade talks. "Huffbauer said.
" I don't even know if a big deal is possible in the next administration, but certainly not in this administration, "he added.