Trade talks between Chinese and US representatives got underway in Madrid this weekend, with items such as TikTok, trade and the economy on the agenda, as well as doing the groundwork for a potential meeting between the two countries’ leaders.
Trade and investment between the US and China has been on a downward trend in recent months amid the tariff war. Chinese exports to the US dropped 33% in August, compared to the year before, and a recent survey from the American Chamber of Commerce in Shanghai showed that a record 47% of respondents said that they had diverted investments planned for China, primarily in favor of Southeast Asia.
These numbers provide a background for the talks, and both sides need to come to a decision on how they are going to move forward. It is something of a game of chicken. Both sides, to one extent or another, need the other—China in terms of revenues from sales to the US and the US needs reasonably priced consumer goods and commodities such as rare earths.
What comes out of the talks will have an effect on a lot of different peoples and countries. If they go well, those countries in Southeast Asia, as well as places such as Mexico, which have benefited from the diversion of funds from China, may lose out. But at the same time, if the talks stall as they have done in recent months, both the US and China are likely to continue to feel the negative effects.