Facing another U.S. Tariff hike, Chinese President Xi Jinping is getting tougher with Washington instead of backing down.
Beijing fired what economists called a "warning shot" at Washington by letting its yuan currency weaken in response to President Donald Trump's latest threat of more punitive import duties on Sept 1.
Chinese buyers canceled multibillion-dollar purchases of U.S. Soybeans. Regulators are threatening to place American companies on an "unreliable entities" list that might face curbs on their operations.
Both sides have incentives to settle a trade war that is battering exporters on either side of the Pacific and threatening to tip the global economy into recession.
But Xi's government is lashing out and might be, in a revival of traditional Chinese strategy, settling in for prolonged wrangling in response to what it deems American bullying and attempts to handicap China's economic development.
On Tuesday, though, the Trump administration may have eased frictions at least slightly when it announced that it would soften the impact of the 10 per cent tariffs it had said would begin Sept. 1 on the $300 billion in Chinese goods it hasn't already taxed.
It will delay until Dec 15 the tariffs on cellphones, laptop computers, video game consoles, some toys, computer monitors and some shoes and clothing.
Negotiators are to meet in September in Washington, but China's political calendar makes progress unlikely.
The ruling Communist Party is preparing to celebrate its 70th anniversary in power on Oct. 1 — a nationalism-drenched milestone that puts pressure on Xi, the party leader, to look tough.
"The downside risk of no deal has increased," said Raoul Leering, chief trade analyst for Dutch bank ING.
Six months ago, Chinese negotiators were discussing possible concessions, including more purchases of American farm goods, market opening and changes in business rules.
But by May, Chinese leaders had turned skittish in the face of what they saw as constantly shifting American priorities on a list of demands that range from narrowing their trade surplus to opening markets to possibly scrapping their economic development strategy.