U.S. and China Resume Trade Negotiations With Slim Hopes for a Deal

“China is looking to go back to the status quo before the trade war started, and to rewind the clock to before Huawei was put on the entity list” of companies that require special licenses to buy American goods, said Andy Mok, a trade specialist at the Center for China and Globalization in Beijing. “The biggest threat right now is what happens on Huawei,” he added.

Mr. Trump insists that the American economy is still insulated from the trade war and has repeatedly said the United States is benefiting financially from the tariffs he has imposed on Chinese goods. But economic data suggests that the tensions with China, America’s largest trading partner, are taking a toll.

Data released on Friday showed that the American economy slowed in the second quarter of the year, with gross domestic product expanding at an annual rate of just 2.1 percent as net exports and business investment slumped. The Federal Reserve has frequently cited the trade war as a problem for the economy and it is expected to cut interest rates on Wednesday to help keep the economic expansion going. American stock markets have risen on news that talks would resume, only to plummet when negotiations came to a standstill.

Big American companies whose performance has faltered are also citing tariffs and trade tensions on both sides of the Pacific as a reason. Caterpillar cited cooling activity in China, a major market, when it reported falling sales growth for the second quarter, while Hasbro, Nintendo and other companies have discussed plans to move part of their supply chains out of China to countries like Vietnam.

The trade war is also dragging on the Chinese economy. The shift of multinational companies out of China, a trend that was already underway as a result of rising Chinese wages, could have a corrosive effect on growth.

Foreign investment in China has been crucial over the past four decades in bringing new technologies and new management techniques to the country. But blue-collar wages in China have soared to the point that the country is increasingly uncompetitive in lower-skilled industries.

“What this trade issue has done is accelerate a process that was going to happen anyway, from an export-based economy to a consumer-based economy, the same as in Japan or South Korea,” said Harley Seyedin, the president of the American Chamber of Commerce in South China, in an interview in Guangzhou, China.