Washington and Beijing both claimed victory on Monday as the world’s two largest economies stepped back from the brink of a global trade war and agreed to hold further talks to boost U.S. exports to China.
Over the weekend, the two sides pledged to keep talking about how China could import more energy and agricultural commodities from the United States so as to narrow the $335 billion annual U.S. goods and services trade deficit with China, although details and a firm timeline were thin.
The biggest immediate beneficiary appeared to be China, which won a reprieve from threatened tariffs on $50 billion US of its exports to the U.S. as well as a lifeline for ZTE Corp., a major company whose existence had been threatened by U.S. sanctions.
The U.S. meanwhile appeared to have won promises of more imports by China, although there were no specifics.
Economists at Morgan Stanley estimated exports of U.S. agricultural products — primarily beef — and energy — mostly liquified natural gas — could add between $60 billion and $90 billion to sales to China over a period of years. That is far less than the $200 billion reduction in China’s trade surplus that President Donald Trump had demanded at the start of talks.
“China has agreed to buy massive amounts of ADDITIONAL Farm/Agricultural Products — would be one of the best things to happen to our farmers in many years!” Trump wrote on Twitter on Monday.
Under our potential deal with China, they will purchase from our Great American Farmers practically as much as our Farmers can produce.
In both nations’ interests
China’s government praised the cooling of trade tensions with the U.S., saying the agreement was in both nations’ interests while state media trumpeted what it saw as Beijing’s refusal to surrender to U.S. economic threats.
There were, however, more questions for the Trump administration, which stands accused by critics of selling out on plans to stop the theft of U.S. companies’ trade secrets in exchange for a quick deal to reduce the U.S. trade deficit.
Questions also remained over the administration’s handling of ZTE, a Chinese company that had been sanctioned by Washington and effectively put out of business, but whose fate was made a precondition of last week’s trade talks in a conversation between Trump and President Xi Jinping.
Trump agreed to allow ZTE to stay in business and the U.S. and China struck a deal to drop their tariff threats while they worked on a wider trade agreement, U.S. Treasury Secretary Steven Mnuchin said Sunday.
Washington had threatened to impose tariffs on $50 billion of Chinese imports unless Beijing rectified its theft of U.S. intellectual property. After China responded with its own tariffs on U.S. agriculture, Trump threatened to impose duties on an additional $100 billion of Chinese goods, a move that hit global stock markets hard due to fears of rising protectionism.
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U.S. Commerce Secretary Wilbur Ross will travel to China next week to help finalize a trade agreement, Mnuchin said on Monday. Most observers say a firm deal is likely to take a long time.
In an interview earlier with CNBC, Mnuchin characterized the U.S. tariff plan as suspended, but warned that “the president can always put tariffs back on.”
Speaking at a daily briefing, Chinese foreign ministry spokesperson Lu Kang said both countries had clearly recognized that the reaching of a consensus was good for all.
“China has never hoped for any tensions between China and the United States, in the trade or other arenas,” Lu said.
But Chinese media was also quick to point out how the country had successfully defended its interests.
Mei Xinyu, a commerce ministry researcher, wrote on the WeChat account of the overseas edition of the ruling Communist Party’s official People’s Daily that the agreement preserved China’s right to develop its economy as it sees fit, including moving up the value chain.
The deal also focused on China’s “positive position” to increase imports rather than a “negative position” of getting it to cut exports, Mei said.
The official China Daily said everyone could heave a sigh of relief at the ratcheting down of the rhetoric, and cited China’s chief negotiator, Vice Premier Liu He, as saying the talks had proved to be “positive, pragmatic, constructive and productive.”
“Despite all the pressure, China didn’t ‘fold’, as Trump observed. Instead, it stood firm and continually expressed its willingness to talk,” the English-language newspaper said in an editorial.