The United States and China made good progress in high-level trade talks on Thursday, President Donald Trump told reporters, despite expectations that the two sides remain far away from a comprehensive deal.
“I think it’s going really well,” Trump said before leaving for a rally in Minneapolis. “We had a very, very good negotiation with China. They’ll be speaking a little later. They’re basically wrapping it up and we’re going to see them tomorrow right here and it’s going very well.”
The Chinese team led by Vice Premier Liu He is in Washington for the first since Trump escalated his trade war against China in August. Frustrated by the slow pace of the negotiations, he announced plans to ramp up tariffs to put more pressure on Beijing.
This week, the two sides have sent signals they could reach agreement on some measures, even if a wider deal remains distant.
“I’m not here to suggest we’re going to have a grand slam in the U.S.-China relationship this week, but we’re going to make progress,“ said Myron Brilliant, the head of international affairs at the U.S. Chamber of Commerce.
Brilliant said he and other business executives met with Liu, who is leading the talks for Beijing, for 75 minutes on Wednesday.
The hopeful developments came after futures markets were whipsawed overnight amid reports that the Chinese delegation would cut its trip short.
But stocks moved higher on Thursday after Trump said he would meet with Liu on Friday after talks wrap up with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.
“Big day of negotiations with China,” Trump posted on Twitter. “They want to make a deal, but do I? I meet with the Vice Premier tomorrow at The White House.”
Trump reaffirmed that the Friday meeting would take place, another sign that the talks made at least some progress. The U.S. and Chinese teams were also scheduled to continue their discussions over dinner Thursday night.
Trump further complicated the talks last week, when he suggestion he might use the negotiations to pressure the Chinese to investigate former Vice President Joe Biden and his son Hunter for any improper activities.
Asked Thursday if he was joking, as some Republicans have said, Trump replied: “China has to do whatever they want. If they want to look into something, they can look into it. If they don’t want to look into it, they don’t have to.”
Stocks closed slightly higher on hopes the two sides might agree to some sort of mini-deal. Both the Dow Jones Industrial Average and the S&P 500 finished in positive territory, but up less than 1 percent.
U.S. businesses are hoping the 13th round of trade talks this week will lead to a cooling off in the escalating tariffs and lay the groundwork for tackling more challenging issues. Both businesses and administration officials complain that Chinese policies force U.S. companies to hand over valuable technology, restrict data transfers, and provide subsidies and other advantages to Chinese firms.
“The Chinese understand that waiting is not an option, waiting out the president’s term is not an option,” Brilliant said.
For months, China has not only imposed steep tariffs on U.S. goods but also cut off purchases of many agricultural products. But in a gesture of good will, China has ramped up in recent weeks purchases of U.S. farm goods like soybeans and pork that were hit hard by Chinese retaliation. Increasing sales of farm goods have one of Trump’s personal demands in meetings with Chinese President Xi Jinping.
The Agriculture Department reported on Thursday that China bought 2.09 million metric tons of U.S. soybeans and 130,000 metric tons of U.S. wheat during the week Sept. 27 to Oct. 3. In good news for struggling U.S. pork producers, who have also been shut of China’s market, it bought 142,000 tonnes of pork for delivery in 2019 and 2020, USDA said.
So far, China has bought 4.79 million metric tons of U.S. soybeans for delivery in the 2019/20 marketing year, up sharply from just 1.08 million at the same point last year.
Liu told Brilliant and other officials before the talks that China has come to the negotiations this week with “great sincerity” and is willing to make serious exchanges, according to Chinese state broadcaster China Global Television Network.
On Oct. 15, Trump is scheduled to increase a duties on $250 billion worth of goods from to 30 percent, from 25 percent. More significant, the U.S. will slap a 15 percent tariff on Dec. 15 on almost all remaining Chinese imports including consumer goods like laptops, smartphone, footwear and clothing.
In the latest talks, China is offering to increase U.S. access to its financial services and automobile markets. It has also said it would bolster intellectual property, or IP, protections.
“What we’re hearing mostly is around what I call the the 20th century IP protections,” said Brilliant, indicating that China is only willing to address outdated issues related to copyrights and trademarks.
Those offers, in which China has its own self-interests, don’t include measures that go to the heart of U.S. complaints over technology transfer and data protection that led to the Trump administration’s tariff actions, he said.
Brilliant also suggested the two sides could roll out a currency agreement “that could lead to a decision by the administration not to put forward a tariff rate hike on Oct. 15.”
Trump has accused China of devaluing its currency to minimize the added costs of U.S. tariffs on American importers. Trump took the rare step of declaring China a currency manipulator in August, and it’s unclear if a currency deal would reverse that designation. The next semi-annual Treasury report on exchange rate practices of major trading partners is due to be released Oct. 15.
Mnuchin said in April that a currency deal with China was nearly complete. People close to the talks said it could mirror currency provisions in the USMCA, which made countries reaffirm International Monetary Fund commitments not to manipulate currencies to gain a trade advantage.
The agreement didn’t apply any specific enforcement provision on those broader commitments but made transparency and reporting requirements subject to a dispute settlement process if they weren’t adhered to.
“We don’t think this is an issue that should dominate the trade talks,” Brilliant said. “There are bigger issues in our minds that have to be addressed in these trade negotiations.”
It remains unclear, however, whether Trump will agree to hold off on next week’s tariff increase based on the latest offers from the Chinese delegation.
One person close to the talks told POLITICO a delay of the tariff hike is unlikely to happen based on what China has offered so far.
Another person close to the negotiations also said what the Chinese offered at the beginning of this week was “clearly” not enough to roll back a 15 percent tariff the U.S. placed on roughly $110 billion worth of largely consumer goods from China on Sept. 1.
Clete Willems, a trade negotiator who had been directly involved in the China talks until he left the Trump administration earlier this year, said Thursday that the White House’s focus should be on reaching a smaller-scale deal that could help rebuild trust between the two countries.
“Right now, the political conditions in both countries are just not conducive to a big deal,” Willems said during an event at George Washington University. “What we actually need to be thinking about now is, is there a way to build some confidence?”
He added that accepting a partial deal could be good politically for Trump, despite some criticism that settling for anything less than broad-based reforms could be seen as capitulating to China.
“That to me isn’t the U.S. backing down,” Willems said. “It’s actually the U.S. just recognizing we aren’t going to get the big deal right now, so let’s bank a little progress, let’s see if China’s sincere and actually going to implement those first steps, and if they are, then maybe we can build off that for the future.”
Whether that deescalation could happen this week depends entirely on what Beijing offers, Willems later told POLITICO.
He said promises to buy more U.S. agricultural products alone probably will not be enough to satisfy Trump, but pledges to make some structural changes in an area like intellectual property could potentially persuade the president not to increase tariffs on Oct. 15 and Dec. 15 as scheduled.
The next step would be for the U.S. to roll back tariffs, perhaps to the $250 billion level where they were earlier this year — which could happen once China begins to actually implement some changes, he said.
“From the U.S. standpoint, if you can get back to the 250, that hurts them more than it hurts us,” he added. “And I think we could sustain that until they actually make the other changes we need.”
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