The US and China are aiming to reach a trade war truce as early as this week, as they launched a new round of face-to-face negotiations with hopes that a limited agreement to resolve the dispute afflicting the world’s two largest economies was within striking distance.
Speaking on the White House lawn as Thursday’s negotiations wrapped up, Mr Trump said: “We’re going to see them tomorrow, right here, and it’s going very well”
Senior officials from both sides are looking to craft a ceasefire that would at least stave off higher tariffs on $250bn of Chinese goods due to kick in next week. If the talks make greater-than-expected strides, they could also result in a freeze on tariffs on a further $156bn of Chinese imports due in December — and roll back some existing US levies.
People briefed on the negotiations said the package being discussed would involve additional US agricultural purchases by China, as well as some provisions on currency, intellectual property and market access that had been on the table earlier this year between the two governments. The thorniest issues in the trade relationship — which include industrial subsidies, digital trade, and technology transfer — are unlikely to be tackled at this stage, those people said.
While this would fall short of the comprehensive trade agreement that was being discussed this spring between Washington and Beijing, it would offer a reprieve from the tit-for-tat escalation in trade tensions that cast a cloud over the global economy in recent months.
In an encouraging sign for the talks, Donald Trump, the US president, said earlier on Thursday that he would meet with Mr Liu on Friday. “Big day of negotiations with China. They want to make a deal, but do I? I meet the Vice Premier tomorrow at The White House,” Mr Trump wrote in a tweet in the morning.
A breakthrough this week could pave the way for a new summit between Mr Trump and Xi Jinping, the Chinese president, at the Asia-Pacific Economic Cooperation leaders’ meeting in Chile next month.
Myron Brilliant, head of international affairs at the US Chamber of Commerce, the largest US business lobby group, said on a call with reporters on Thursday that he had spoken to both delegations and noted that their desire to make “progress” in this round of talks. Mr Brilliant said “we won’t get a big agreement this week” but a smaller deal was nonetheless “a step in the right direction”.
Since the trade war with China began in 2018, the US has moved to impose levies of different rates on about $360bn of Chinese imports, which is more than half of the total value of Chinese goods sent to the US annually. However, the escalation in tensions has not been uniform: at various times over the past eighteen months, Mr Trump has agreed to delay tariffs in order to soothe markets, and limit the economic damage ahead of the 2020 election campaign. On the other hand, the US president has also wanted to maintain an aura of toughness with Beijing which plays well with his political base, and avoids a backlash from China hawks on Capitol Hill.
If no deal is reached this week tariffs on $250bn of those goods will rise from 25 per cent to 30 per cent on October 15, and new levies of 15 per cent will be applied to all remaining Chinese imports, including a myriad of consumer goods, starting on December 15.
The run-up to the talks was overshadowed by the impeachment proceedings initiated by House Democrats against Mr Trump and the National Basketball Association’s stance towards the Hong Kong protests. The US also took action targeting Chinese companies and individuals involved in human rights violations in Xinjiang, the western Chinese region, which elicited an angry reaction from Beijing.
Meanwhile, US administration officials have been considering measures to restrict capital flows between the two countries, and to crack down on parcels from China that contain contraband. The fraught signals heading into the talks had led to speculation that Mr Liu might cut short his visit to Washington, but those fears eased by Thursday morning.
The attempt by the US and China to reach a new truce in their trade war follows months of growing concern about the impact of their economic conflict on global growth. The IMF, World Bank and other international institutions have been steadily downgrading their forecasts for output increases around the world, both this year and next, as the trade war has dragged on.
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In the US economy, the brunt of the pain from the trade war has been borne by farmers hit by Chinese retaliatory tariffs on their exports, but manufacturers have increasingly suffered from lower demand from abroad, as well as the direct impact from tariffs.
China accelerated purchases of US farm products ahead of the trade talks, ordering more than 3m tonnes of soyabeans in the past few weeks and another 398,000 tonnes reported on Thursday morning. China also purchased a record 142,000 tonnes of pork last week, the US Department of Agriculture reported.
Additional reporting by Gregory Meyer in New York
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