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US-China trade talks won't break down despite latest escalation, expert says

Key Points
  • Trade negotiations between the U.S. and China threaten to fall apart once again after both sides announced new tariffs on each other's goods over the weekend.
  • William Reinsch, a trade expert from Center for Strategic and International Studies, says neither country wants to be seen as the one that caused talks to break down.
  • Back-and-forth attacks between the U.S. and China could continue until just before Americans vote in the 2020 presidential election, predicts Reinsch.
U.S. President Donald Trump meets with China's President Xi Jinping at the G20 leaders summit in Japan, June 29, 2019.
Kevin Lamarque | Reuters

The escalation in the U.S.-China tariff fight over the weekend is unlikely to derail trade negotiations between the two economic giants, an expert from the Center for Strategic and International Studies said Monday.

That's because neither the U.S. nor China wants to be seen as the party that caused talks to break down — which will have repercussions on their political image, said William Reinsch, the think tank's senior advisor and Scholl Chair in international business.

"If Trump pulls out, it's a major failure for him. He's spent a year tweeting about how much progress we're making, the negotiations were great ... to dump it all now would subject him to great criticisms," Reinsch told CNBC's "Squawk Box."

"On the Chinese side, they spent a lot of time claiming that they're the good guys, they respect the rules. If they pull out, I think it hurts their image," he added. "Also if they pull out, it allows Trump to blame them, which gives him a little bit of a victory here, I don't think they want that."

A smart move for Trump is trying to reach an agreement in October 2020 because then ... people would have voted before they figure out it's any good or not.
William Reinsch
Center for Strategic and International Studies

Washington and Beijing have been negotiating for an agreement to resolve issues such as intellectual property rights protection in China, Chinese state subsidies to government-owned companies and bilateral trade imbalance. Negotiations broke down in May when U.S. President Donald Trump raised tariffs on Chinese goods.

Talks have recently resumed but threatened to fall apart again over the weekend, when both China and the U.S. announced new tariffs on each other's goods.

Trump's trade victory

Such back-and-forth attacks between the two countries could continue until just before Americans vote in the 2020 presidential election, according to Reinsch.

From Trump's perspective, "he needs a victory but he needs it a year from now — he doesn't need it now," Reinsch said. Reaching a deal with China in the coming months allows Americans time to scrutinize the agreement before the presidential vote in November 2020, which may not be favorable to Trump's reelection chances, he said.

"If there's an agreement, it's going to be less than what he wants because the Chinese are not going to agree to all of the American demands. So, if he does that now, or in September or October, it's got a year to fall apart. People will see the weaknesses, they'll know whether or not China is complying," he explained.

"A smart move for Trump is trying to reach an agreement in October 2020 because then ... people would have voted before they figure out it's any good or not. So, I think you're going to see the back and forth going on for a year and then he'll try to make a deal," said Reinsch.