China for the first time made clear what it wants to see from the U.S. in talks to end their trade war, laying bare the deep differences that still exist between the two sides.

In a wide-ranging interview with Chinese media after talks in Washington ended on Friday, Vice Premier Liu He said that in order to reach an agreement the U.S. must remove all extra tariffs, set targets for Chinese purchases of goods in line with real demand, and ensure that the text of the deal is balanced to ensure the dignity of both nations.

Lius three conditions underscore the work still to be done if an accord is to be reached between the worlds two largest economies. President Donald Trumps administration told China it has a month to seal a trade deal or face tariffs on all its exports to the U.S.

That threat was made during talks on Friday in Washington, hours after Trump upped the ante by imposing a second round of punitive duties on $200 billion in Chinese goods. The talks are under close scrutiny across global financial markets, and U.S. stocks turned positive after negotiators on both sides said the session had gone fairly well.

Liu said both sides agreed to keep talking despite what he called some temporary resistance and distractions, and to hold future meetings in Beijing. He dismissed the idea that talks had broken down. Its normal to have hiccups during the negotiations. Its inevitable. China has not yet detailed how it will retaliate to the latest increase in tariffs.

Liu also struck a note of defiance. For the interest of the people of China, the people of U.S. and the the people of the whole world, we will deal with this rationally, the vice premier said. But China is not afraid, nor are the Chinese people, adding that China needs a cooperative agreement with equality and dignity.

Candid and constructive

In a series of tweets that cheered markets, Trump declared on Friday that the talks with China had been candid and constructive. The relationship between President Xi and myself remains a very strong one, and conversations into the future will continue, he said. Further talks are possible, but there is no immediate plan for the next round, according to a person familiar with the negotiations.

Lius comments reveal a new fault line. Whereas U.S. negotiators previously accused China of walking back on commitments to change laws on technology transfer and other issues, Liu argued that the US team is pushing for bigger Chinese purchases to level the trade imbalance than had originally been agreed.

According to Liu, Presidents Xi Jinping and Donald Trump had achieved an initial consensus on a number when they met in Argentina. That is a very serious issue and cant be changed easily.

The amount of purchases by China should be in line with reality, according to a commentary by state news agency Xinhua on Saturday. China also sees the removal of all the extra tariffs that have been imposed since last year as a precondition to a deal, whereas U.S. negotiators see retention of some duties as a key mechanism to enforce a deal.

In a statement late on Friday, U.S. Trade Representative Robert Lighthizer said the administration would release details of its plans for tariffs on roughly $300 billion in imports from China on Monday, setting the process in motion for Trump to deliver on his latest threat.

Election year

This weeks tariff move is likely to have significant short-term consequences for retailers and other U.S. businesses reliant on imports from China. But extending it to all trade would increase the economic and political stakes even further for Trump and American businesses.

Such a step would see price increases on smartphones, laptops and other consumer goods -- the kind that Trumps advisers have been eager to avoid, out of concern for the fallout. It would likely provoke further retaliation, and some economists are predicting it could even tip the U.S. economy into recession just as Trump faces re-election in 2020.

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