WASHINGTON (Reuters) - U.S. and Chinese officials met for the first time in more than two months to try find a way out of their deepening trade conflict, but there was no evidence that the low-key discussions would halt a new round of U.S. tariffs due on Thursday. A delegation of Chinese officials entered the U.S. Treasury Department on Wednesday for talks, video on CNBC showed. Business groups expressed hope that the two-day meeting would mark the start of serious negotiations over Chinese trade and economic policy changes demanded by President Donald Trump. Trump has threatened to impose duties on virtually all of the over $500 billion of Chinese goods exported annually to the United States unless Beijing agrees to sweeping changes to its intellectual property practices, industrial subsidy programs and tariff structure. Beijing has denied U.S. allegations that it systematically forces the unfair transfer of U.S. technology and has said that it adheres to World Trade Organization rules. The talks are the first formal interaction between U.S. and Chinese officials since June, when U.S. Commerce Secretary Wilbur Ross unsuccessfully sought to secure major Chinese purchases of U.S. soybeans and liquefied natural gas. Trump on Monday told Reuters in an interview that he did not “anticipate much” from the talks led by U.S. Treasury Under Secretary David Malpass and Chinese Commerce Vice Minister Wang Shouwen. In the past, key members of the Trump administration have been at odds over whether to pursue negotiations with China or to apply pressure through more tariffs, with Treasury Secretary Steven Mnuchin in the former camp and U.S. Trade Representative Robert Lighthizer and White House trade adviser Peter Navarro in the latter. FILE PHOTO: The United States flag flies atop the U.S. Treasury Department in Washington November 18, 2008. REUTERS/Jim Bourg/File Photo Asked on Wednesday what the president expected from the talks, White House Press Secretary Sarah Sanders told reporters: “These conversations are continuing. I don’t have any announcements on them ... Certainly what we’d like to see is better trade deals for the United States.” The Treasury, the USTR office, the U.S. Commerce Department and the Chinese Embassy did not respond to requests for comment. Speaking in Beijing on Wednesday, Chinese Foreign Ministry spokesman Lu Kang said that he was hopeful for a “good outcome”. “We hope that everyone can calmly sit down together and have earnest discussions toward an outcome that is beneficial to both sides,” Lu said. TARIFFS LOCKED, LOADED U.S. Customs and Border Protection on Wednesday confirmed on its website that at 12:01 a.m. EDT (0401 GMT) on Thursday it would begin collecting additional 25 percent duties on 279 Chinese import product categories valued at $16 billion and identified by USTR on Aug. 16. Key products to be hit by the duties include semiconductors, chemicals, plastics, motorbikes and electric scooters. China has vowed to retaliate with new tariffs on $16 billion worth of additional imports from the United States, including fuel, steel products, autos and medical equipment. Jay Timmons, president of the U.S. National Association of Manufacturers, said he supported Trump’s goals of ending China’s unfair trade practices, but was encouraged the two sides were back at the negotiating table. “The costs of a sustained trade war have the potential to be devastating for America’s manufacturers and workers,” he said. China analysts said there were low expectations for a deal imminently, but keeping talks going was a positive move. “If the Chinese say one interesting thing, maybe you set up a second meeting and the level goes up a step,” said Derek Scissors, a China scholar at the American Enterprise Institute, a Washington think tank.<doc-sep>The U.S. and China are meeting later this week in Washington to try to find some common ground in their escalating trade war, but don't expect a "grand bargain," according to an international trade scholar. Markets are closely watching the bilateral trade talks aimed at resolving an escalating tariff war that threatens to engulf all trade between the world's two largest economies. But, according to Alex Capri, a visiting senior fellow at the National University of Singapore's business school, China and the U.S. face substantial differences of opinion — especially on issues that define China's "economic nationalism." "There are just fundamental issues that are part and parcel to the Chinese economy: the subsidies, the technology transfers, the protection of the local markets. That's not going to go away, so there's no grand bargain," Capri said.<doc-sep>
Beyond tariffs, currency concerns have re-emerged as an issue in the Trump administration, and they are expected to come up during this round of talks. The value of China’s currency, the renminbi, has fallen roughly 10 percent against the dollar since the beginning of April, a change that makes Chinese products cheaper for foreigners to purchase and helps offset the impact of the Trump administration’s tariffs. Economists say the currency has weakened because of market forces and the strengthening of the dollar, as well as the influence of the Chinese government, which sets a baseline for the currency and then allows its value to fluctuate within a narrow band. That drop in value will put pressure on the Treasury Department in advance of an October report in which Mr. Mnuchin is charged with deciding whether to label countries currency manipulators. So far, the Trump administration has declined to give China the label, saying that while China manipulated its currency in the past, that problem had dissipated for now. But in the last month, China’s currency has once again become a target for Mr. Trump. “China, the European Union and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollars gets stronger and stronger with each passing day — taking away our big competitive edge,” Mr. Trump tweeted on July 20. “As usual, not a level playing field …” In its coming talks, the Treasury Department will seek to pressure the Chinese to lift the value of their currency, a person briefed on the plans said. But additional American tariff measures going into effect in coming months could further push down the value of the renminbi against the dollar, complicating those efforts. The Trump administration is engaged in trade clashes on multiple fronts, as American negotiators seek to wrap up talks over the North American Free Trade Agreement with Canada and Mexico and hold additional talks with European and Japanese counterparts in coming months.