The United States said on Tuesday it had imposed visa restrictions on Chinese officials for the detention or abuse of Muslim minorities, heightening tensions with Beijing and casting a pall over high-level talks to end a 15-month trade war.
The State Department announced the move just a day after the U.S. Commerce Department cited the mistreatment of Uighur Muslims and other predominantly Muslim ethnic minorities in China in its decision to add 20 Chinese public security bureaus and eight companies to a trade blacklist.
The State Department did not name the Chinese officials affected by the visa clampdown. Secretary of State Mike Pompeo said the restrictions “complement” the Commerce Department’s actions.
China’s embassy in Washington did not immediately comment. China has consistently denied any mistreatment of Uighurs.
Major U.S. stock indexes added to losses after the State Department’s announcement, with the S&P 500 index .SPX closing down about 1.6%. Investors feared the escalating tensions between Washington and Beijing could doom efforts to get the trade negotiations back on track.
U.S. and Chinese deputy trade negotiators had been due to meet in Washington for a second day of talks on Tuesday, laying the groundwork for the first minister-level meetings in more than two months later this week.
The South China Morning Post reported China had tamped down expectations ahead of the talks scheduled for Thursday with Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, saying the Chinese delegation could leave earlier than planned because “there’s not too much optimism.”
Earlier on Tuesday, China warned the United States to stop interfering in its affairs. China will continue to take firm and resolute measures to protect its sovereign security, Foreign Ministry spokesman Geng Shuang told a regular media briefing without elaborating.
Prospects for a breakthrough in the on-again, off-again trade talks sagged after the Commerce Department’s blacklisting announcement on Monday. Hikvision (002415.SZ), which bills itself as the world’s largest maker of video surveillance gear, was among the firms targeted.
The listing bars the firms from buying components from American companies without U.S. government approval, a potentially crippling move. It follows the same blueprint used by Washington in its attempt to limit the influence of Huawei Technologies Co Ltd [HWT.UL] for what it says are national security reasons.
Washington is also moving ahead with discussions around possible restrictions on capital flows into China, with a focus on investments made by U.S. government pension funds, Bloomberg reported.
Tit-for-tat tariffs imposed by the United States and China have roiled financial markets and slowed capital investment and trade flows.
International Monetary Fund Managing Director Kristalina Georgieva issued a stark warning about the state of the global economy, saying an economic deceleration could worsen without action to resolve trade conflicts and support growth.
“We are decelerating, we are not stopping, and it’s not that bad. And yet, unless we act now, we are risking a potential more massive slowdown,” Georgieva, who took over as IMF chief this month, said at an event to preview the IMF and World Bank autumn meetings next week in Washington.
LOOMING TARIFF HIKES
The trade talks in Washington are taking place days before U.S. tariffs on $250 billion worth of Chinese goods are slated to rise to 30% from 25%. President Donald Trump has said the hike will take effect on Oct. 15 if no progress is made in the negotiations.
Trump, who has embraced protectionist policies as part of an “America First” agenda aimed at rebalancing global trade and boosting U.S. manufacturing, said on Monday a quick trade deal with China was unlikely, and that he would not be satisfied with a partial agreement.
The two sides have been at loggerheads over U.S. demands that China improve protections of American intellectual property, end cyber theft and the forced transfer of technology to Chinese firms, curb industrial subsidies and increase U.S. companies’ access to largely closed Chinese markets.
Trump launched a new round of tariffs after the last high-level talks in late July failed to result in Chinese agricultural purchases or yield progress on substantive issues. China quickly responded with tariff increases of its own.
With no signs of any significant momentum in the talks, the world’s two largest economies could be braced for an open-ended trade dispute, an idea that is gaining currency in some circles.
“I can feel that Chinese society has low expectation for real breakthrough in the new round of trade talks. Most people think alternate trade war/trade talks will be a normal thing between China & the US,” Hu Xijin, the editor of China’s state-run Global Times newspaper, wrote on Twitter.
Another flashpoint in U.S.-China relations erupted over the weekend when an official with the NBA’s Houston Rockets wrote a tweet in support of Hong Kong democracy protests. The tweet, which was quickly deleted, sparked a backlash in China and a rebuke from the National Basketball Association, which in turn faced U.S. criticism that it was allowing free speech to be censored for commercial reasons.
Police in Hong Kong have used rubber bullets, tear gas and water cannons against pro-democracy demonstrators in the former British colony, which has been plunged into its worst political crisis in decades.
Trump has called for a peaceful resolution to the protests, and warned the situation had the potential to hurt trade talks.
Beijing views U.S. support for pro-democracy protests in Hong Kong as interfering with its sovereignty.