| Hi, this is John Liu in Beijing, where the metaphor du jour is that the US and China are playing a game of chicken over tariffs and trade. There’s a lot that the metaphor gets right. Pride, for one, is fueling the impulse for escalation on both sides, as is the aversion to backing down, lest it suggests weakness. Second is that both countries understand this game will inflict ever more pain the longer it goes on and could ultimately end in calamity for all. Last, everyone is looking for an off-ramp that keeps their egos intact. Thinking about the relationship in that context also underlines why there’s such global interest in when Washington and Beijing might sit down and look for that off-ramp together. President Donald Trump has made it clear many times that he wants talks, though his position seems to be that China should call him to get things started. Adding to signs the nations may be haltingly inching their way toward negotiations, Trump said this week that officials he believed represented Chinese leader Xi Jinping had sought to start discussions. Beijing has taken a fairly similar position to the US. We reported this week on the conditions Chinese officials want to see the US meet before they’ll agree to negotiate. Read the story about respect placing high on their list of demands here. With each side looking at the other and essentially saying “the ball is in your court,” the prospects for formal discussions anytime soon look remote, putting companies like Boeing in a difficult position. What seems likely in the short term is more haggling over the conditions for negotiations to just start. But let’s look forward to when that’s all been settled, to when the Chinese and American teams are sitting across from each other at a long table for their first face-to-face discussions. Even that would only be the start of what is likely a long, fraught process — one with no guarantee of finding that off-ramp. While there are many reasons negotiations between the US and China will be hard going, two stand out. The first is that the issues are complex and the stakes extremely high. China wants the US to allow it to have the space and conditions to develop its economy, to modernize, and to improve the living standards of its people. Those are reasonable demands on their own, and indeed if all the US wants is to shrink the trade deficit, there might even be some synergies. Yet if the overarching American concern is national security, and what Washington wants is to make sure China never surpasses it economically, militarily and technologically – something many Chinese officials suspect is the case – then it becomes hard for the US to accept China’s demands. The trade deal reached during Trump’s first term was a compromise that highlights this challenge. Unable to reach an agreement on the fundamental issues testing ties between them, Beijing and Washington instead pulled together what they could agree on – mostly Chinese purchases of American commodities for access to US markets – and called it a Phase One deal. The intention was to come back to the hard problems in the next phase. That deal came with Trump preparing for reelection. This time around there’s more uncertainty about what motivation either side might have to get something done. Trump is barred from another term, despite his suggestions to the contrary, and while US midterm elections are on the horizon, it’s unclear how motivating they are for him.  Xi Jinping is in a standoff with Donald Trump over trade. Photographer: Athit Perawongmetha/Getty Images For Xi, a seriously sputtering Chinese economy would create real motivation to get a deal done with his nation’s biggest customer. But China is prepared to roll out substantial stimulus so growth could be maintained at a level that would give Beijing the runway it needs to hold out for a better deal. Getting American and Chinese negotiators in a room is important. Without it, there’s no hope for them or the world of avoiding substantial economic damage. But getting talks started is also many miles away from making things better. What We’re Reading, Listening to and Watching: Vacuum cleaners, motorcycles, barbecues and much, much more were on display this week at the Canton Fair in Guangzhou — the biggest event of its kind in the world. And so was fretting about lost orders, revenue and jobs as the China-US stalemate over commerce deepens. More than a dozen exporters said their shipments to the US have been put on hold or cancelled. Many said they’d have to lay off workers or rely on factories in Southeast Asian nations, which right now enjoy a temporary reprieve from Trump’s punishing levies.  The Canton Fair in Guangzhou this week. Photographer: James Mayger/Bloomberg The travails of an American buyer at the fair, Paul McGrath, sum up the difficulties confronting many companies. He’s launching a firm selling a machine that lets people make their own pet food at home. New tariffs added $5,000 to his import bill for a recent shipment of the appliances from China and future loads would cost even more. McGrath had to raise the retail price of his Made-in-China product to $399. “This is just a disaster,” he said. Vicky Yu, a sales manager at a home appliance company in eastern China, was equally downbeat. Everyone will have to get used to smaller profits, she said. Read more about the Canton Fair vibe here. Jason, an executive at an American baby products firm who asked to be identified by his first name only, said he was relieved about a decision to open a factory in Malaysia last year. Highlighting one of the ways the economies of the US and China are decoupling, that facility ships goods to the US while identical products still made in China go elsewhere in the world. Developments like that are raising worries about the already frail job market in China. Goldman Sachs estimates that up to 20 million people — about 3% of the labor force — may be exposed to US-bound exports. And Morgan Stanley said a recent survey carried out right after the latest round of tariff escalation found that 44% of Chinese consumers fear they or a relative may lose work — the highest level since the first poll in 2020. Read about the difficulties confronting China’s workforce here. Highlighting some of the frustration over the looming impact of US tariffs, Chinese influencers have been bombarding TikTok users in the US with videos mostly filmed in factories around the world’s second-biggest economy that purportedly supply top brands like Lululemon, Nike and others. The aim is to show how the vast majority of consumer goods that Americans love is made in China. Many of the clips even provided contact details so consumers could order directly from the suppliers. “Why don’t you just contact us and buy from us?” said one person selling luxury handbags. “You won’t believe the prices we give you.” But even that workaround will soon fall victim to decoupling. Starting May 2, the US will end an exemption that lets small packages flow into the country without facing duties. Get ready for a brave new economic world. | 
