Trade War Monitor, April 28: China Repeatedly Denies Rumors of Trade Talks With U.S.

Summary

The ongoing China-U.S. trade tensions have seen Beijing repeatedly deny any recent trade talks with Washington and instead roll out a series of policy measures aimed at buoying the Chinese economy and mitigating the effects of escalating tariffs. Central to these efforts is the liberalization of China's service sector across 11 provinces and cities, a move that highlights the government's strategy to enhance economic resilience in the face of intensifying trade barriers and protectionism [para. 1].

Tariffs are significantly impacting various Chinese industries. Former World Trade Organization chief Pascal Lamy warned of a potential "mutual embargo" developing between China and the U.S., and surveys indicate that nearly half of Chinese exporters plan to reduce business with the U.S. due to these frictions. More than 75% of exporters are pivoting to emerging markets to compensate for losses, while concerns grow among third countries about potential overcapacity and redirected Chinese exports [para. 2][para. 12][para. 13][para. 18]. Despite these challenges, there are opportunities for other economies: Brazil, for example, is keen to deepen cooperation with China, and Switzerland is expediting the upgrade of its free trade agreement with Beijing [para. 3][para. 22].

China has categorically denied recent trade negotiations with the U.S., with official spokespeople branding claims of ongoing consultations as misinformation. At the same time, President Trump has made contradictory statements about the state of the talks [para. 5]. In response to economic challenges, China’s leadership is pursuing proactive fiscal and monetary policies, including lowering interest rates and supporting technological innovation, while also addressing internal risks such as local government debt and property market vulnerabilities [para. 6][para. 7].

Further, China is liberalizing market access by revising its "Negative List," reducing restricted sectors to 106 in 2025 from 151 in 2018. Major reforms have streamlined regulatory processes in industries like ride-hailing and business licensing [para. 8]. Financial services are being liberalized as well, with Shanghai opening new avenues for cross-border transactions and improvements to financial infrastructure as part of an 18-point action plan [para. 9].

On the export front, Chinese manufacturers of green technologies—such as solar cells, EVs, and lithium batteries—continue to show growth despite global tensions [para. 11]. The Canton Fair in Guangzhou registered a 20.2% increase in overseas buyers, reflecting robust global interest in Chinese goods, even as U.S. tariffs weigh on exports [para. 12]. Yet, specific cases like Boeing, which has had to reroute undelivered planes from Chinese buyers, illustrate the direct impact of the trade war [para. 15][para. 16].

China's machinery exports rose 7.61% in Q1 2024, with key companies now deriving over half their revenues from overseas. The U.S. accounts for approximately 7%-8% of total engineering machinery exports. However, companies like battery giant CATL are exposed to tariff risks, with the U.S. market contributing nearly 10% of its 2024 profit [para. 19][para. 20]. Joint ventures like SAIC-GM are adapting by increasing local content [para. 21].

Regional supply chains are shifting. Bangladesh is receiving more Chinese investment as firms diversify, while the U.S. has imposed tariffs as high as 3,500% on Southeast Asian solar panel imports to deter Chinese circumvention [para. 24][para. 25]. China aims to leverage its substantial buying power in trade negotiations and seeks to boost domestic demand through additional stimulus and consumption subsidies, prioritizing high-employment service sectors as a response to external shocks [para. 26][para. 27][para. 28][para. 29].