Onlookers have applauded positive signals from the United States and China after the conclusion of trade talks this week, but time is running out to reach a deal on crucial issues before the hard deadline of March 2, when the tariff increase moratorium ends.

The meetings, held in Beijing between Chinese officials and a US delegation led by Deputy US Trade Representative Jeffrey Gerrish, are the first step towards resolving a trade dispute that has rocked the global economy. Originally planned to last just two days from Monday to Tuesday, talks rolled on to Wednesday, with an unexpected appearance from Chinese Vice Premier Liu He on the first day seen as an indication of the extent to which China was taking the powwow seriously.

Official statements at the conclusion of the meetings provided little in the way of detail, underscoring the preliminary nature of the dialogue. The Chinese government’s communiqué called the discussions “broad, deep and meticulous”, saying that they lay the foundation for addressing areas of common concern. Meanwhile, a statement from the US Trade Representative stuck to the party line of emphasising the need for “structural changes in China with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft of trade secrets for commercial purposes, services, and agriculture”, although it did make reference to China’s pledge to buy “a substantial amount of agricultural, energy, manufactured goods, and other products and services from the United States”.

The two parties have agreed to continue to keep in close contact, but some are concerned at the pace of progress.

“Despite signs of positive progress in the US-China trade negotiations, limited time remains to find a compromise on key issues such as the bilateral trade deficit and protection of US intellectual property rights,” Rajiv Biswas, Apac chief economist for IHS Markit, tells GTR. “If no deal can be reached by March 2, the option remains open to extend the trade truce to allow further time for negotiations. However if the gap in negotiating positions remains unbridgeable, the risk of a further escalation in the US-China trade war remains a key risk to the global economic outlook in 2019.”

He adds that the Chinese economy is already experiencing slowing momentum due to weakening export orders, moderating retail sales and some easing in manufacturing activity levels. “The additional shock of an escalation in the US-China trade war would further dent Chinese GDP growth momentum in 2019 and create negative transmission effects to the East Asian manufacturing supply chain.”

Welles Orr, international trade advisor with law firm Miller & Chevalier, served as assistant US trade representative for congressional affairs in the George H. W. Bush administration, where he advised the USTR and White House staff on legislative matters affecting US trade policy. Speaking to GTR, he points out the need to be mindful of the psychology of the Trump administration when assessing progress between the US and China. “You have to keep in mind that this calculation for this administration is all about delivering on commitments and winning. That’s who the president is. That’s how he operates, that’s how he thinks, and that’s how he’s got his team in the administration to think.”

“In this particular negotiation, the US side is really the side that matters, in the sense that the Chinese side needs to persuade the US that China is doing enough to satisfy the demands that the US has made,” adds Louis Kuijs, chief China economist at Oxford Economics.

Since the trade truce was announced at a post-G20 summit meeting in Buenos Aires, China has walked back retaliatory tariffs on US automobiles along with 700 other products and restarted imports of US crude oil, liquefied natural gas and soybeans, but analysts see the US pushing further, demanding structural and institutional reforms in China to level the trade playing ground. “This is pretty complex stuff, and it means that it’s very much up to a political judgement at the top of the US administration to decide whether or not there is sufficient progress,” say Kuijs. He forecasts that it is likely the trade truce will be extended in order to give China time to satisfy the US’s demands.

“People are optimistic that the administration is on the road to really trying to hammer out a good meaningful deal, and the Chinese seem to be finally believing that the US side is serious about it. There are a lot of pundits here in Washington that have said that it wasn’t until this actual meeting on Monday that we could see that the administration was really serious about actually sitting down meaningfully with the Chinese,” says former assistant US trade representative Orr.

For their part, US companies are keen to see a resolution to the standoff, with growing tariffs on imports hurting their bottom line as components become more expensive and US firms operating in China sounding the alarm on the impact increased inspections and slower customs clearance is having on their business.

“The devil is in the detail,” adds Orr. “The US business sector is really looking for meaningful and transparent enforceable commitments on the part of the Chinese to back off on what has been their traditional behaviour toward US companies operating in China.”

He also sees strong political will in Washington DC for a successful resolution to the trade dispute. “Many US trade representatives have actually applauded the president’s moves with China, because it’s the first time an administration is really holding the Chinese accountable under the threat of tariffs. We have had administrations in the past who have talked a good game about bad Chinese behaviour, but never have we had an administration that has actually taken the Chinese to the brink. That is unique, and that is a storyline that people ought to keep in the back of their heads. With that in mind, you hope they’ll get a deal.”

Chinese Vice Premier Liu He is expected to meet US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer in Washington at the end of this month to pick up where the Beijing talks left off. Until then, in spite of positive noises from both sides, uncertainty still reigns supreme, with businesses holding off on investment and supply chain decisions until they can be sure of which way the US-China pendulum will swing.