Face-to-face talks are back on in a move to break the year-long trade war deadlock between China and the United States. But the atmosphere might be decidedly frosty.

Since US President Donald Trump and China’s head of state Xi Jinping agreed to a truce at the Group of 20 summit in Osaka last month, attitudes have hardened.

“For both Washington and Beijing, the patient rebuilding of a rules-based order, not the assertion of unilateral advantage by either, remains the only credible path forward,” Jonathan D. Pollack and Jeffrey A. Bade, both foreign policy experts at the John L. Thornton China Center, said last week in an executive summary for the Brookings Institution, a think tank based in Washington.

“Rather than mirror-image Chinese xenophobic or paranoid behavior, the United States should insist on reciprocity in the relationship to promote openness,” they added.

In the meantime, Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will lead the US negotiating team in the commercial city of Shanghai next week.

They will hold discussions with Beijing’s top trade negotiator, Vice-Premier Liu He, and his delegation in a bid to end the stalemate after talks collapsed in May.

“There’s a lot of issues, so my expectation is that this will be followed up with a meeting back [in Washington],” Mnuchin told the media.

On Tuesday, US Commerce Secretary Wilbur Ross reiterated that the “overriding objective” was to get a good deal, which “is much more important than exact timing.”

So far, the conflict has revolved around a barrage of tit-for-tat tariffs after discussions stalled over crucial “issues” such as excessive state subsidies to China’s corporate juggernauts, intellectual property rights and cyberspying.

Fallout

Last month, the fallout from the dispute saw Washington more than double duties to around 25% on Chinese imports worth US$200 billion.

In response, Xi’s administration increased tariffs on US products worth $60 billion before a ceasefire was put in place.

Significantly, that came after repeated warnings from the International Monetary Fund that trade tensions were having a major impact on global economic growth.

Against this background, Sino-US relations on the political front have deteriorated during the past 18 months as a Cold War chill sweeps in from the East.

Talking to a US Senate Judiciary Committee earlier this week, Federal Bureau of Investigation Director Christopher Wray branded China an “intelligence threat.”

“There is no country that poses a more severe counterintelligence threat to this country right now than China … and I don’t say it lightly,” he said.

Wray had laid the groundwork for his testimony in an interview with the Council on Foreign Relations, which was covered by Asia Times.

Repeating the crux of his argument, he admitted:

“We have as we speak probably about a thousand-plus investigations all across the country involving attempted theft of US intellectual property, whether it’s economic espionage or counter-proliferation, almost all leading back to China.

“It is a threat that is deep and diverse and wide and vexing … Make no mistake that this is a high priority for all of us …China is fighting a generational fight here.

“[But] I want to be clear. This is not about the Chinese people as a whole and it is certainly not about Chinese-Americans in this country.”

‘Stability’

Twenty-four hours after Wray’s Washington appearance, China accused the US of undermining “global strategic stability” in a government white paper on defense.

Released by the State Council Information Office, the 27,000-Chinese-character document called for the People’s Liberation Army to be upgraded into a high-tech fighting force.

“International strategic competition is on the rise,” the white paper stated. “[The US] has provoked and intensified competition among major countries, significantly increased its defense expenditure, pushed for additional capacity in nuclear, outer space, cyber and missile defense, and [has] undermined global strategic stability.”

Still, increased military spending has transformed the balance of power in the East and South China Seas as Beijing’s new naval carrier groups flex their muscles under an umbrella of Chengdu J-20 stealth fighters.

Indeed, more money is in the pipeline after the study also pointed out that the PLA should embrace what it described as “intelligent warfare,” citing artificial intelligence, or “AI, big data, cloud computing” linked to the “Internet of Things.”

Cold War II? Frosty atmosphere? Maybe, the planned trade talks will help raise the temperature by a few degrees. But then, the forecast is far from promising in Shanghai.

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