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The
U.S. and China are taking baby steps to ease tensions in their trade
war, as negotiators prepare for the resumption of face-to-face talks in
Washington in the coming weeks.
On Wednesday, U.S. President Donald Trump said he was postponing
the imposition of 5% extra tariffs on Chinese goods by two weeks,
meaning Chinese officials can celebrate their Oct. 1 national day
without a fresh escalation.
Meanwhile, China is considering
whether to permit renewed imports of American farm goods including
soybeans and pork, according to people familiar with the situation,
potentially taking some pressure off U.S. states with large numbers of
Trump supporters. The Ministry of Commerce said Thursday Chinese
companies have started inquiring about prices for U.S. agricultural
products including soybeans and pork.
At
the request of the Vice Premier of China, Liu He, and due to the fact
that the People's Republic of China will be celebrating their 70th
Anniversary....
....on
October 1st, we have agreed, as a gesture of good will, to move the
increased Tariffs on 250 Billion Dollars worth of goods (25% to 30%),
from October 1st to October 15th.
Taken together, the measures pale in comparison to the
oncoming hit from U.S. tariff increases still in the pipeline for
October and December, the fruit of a rapid escalation in tensions between the two sides last month. At the same time, as evidence mounts in both nations of the economic damage that the trade war is doing, there’s more urgency for a deal.
Trump escalated
the U.S.-China trade war in August when he announced an increase in
levies on Chinese goods. That was in response to higher Chinese tariffs
which were a reaction to a previous increase by the U.S.
China
welcomes the postponement of U.S. tariffs as a goodwill gesture,
Ministry of Commerce spokesman Gao Feng said at Thursday’s regular
briefing. Mid-level teams will meet soon to prepare for higher level
talks, he said, reiterating that both sides are communicating without
giving a date for the meeting between the top negotiators.
Any further agricultural purchases are yet to be made and the volumes are still undecided, the people said. China had halted U.S. farm-product imports in August after negotiations deteriorated.
Earlier on Wednesday, China announced a range of U.S. goods would be exempted
from 25% tariffs put in place last year, as the government seeks to
ease the impact from the trade war. While that move may create some good
will in Washington, China didn’t exempt agricultural goods produced in
key Trump-supporting states.
Welcome
this decision. It should be seen as a goodwill gesture the US side made
for creating good vibes for the trade talks scheduled in early October.
Yesterday China announced to remove 16 categories of US products from
tariff list. Hope reciprocity of goodwill can continue. https://t.co/OWjGIQ4TPl
At home, China is facing factory-price deflation,
falling exports and an uncertain path for government stimulus policy
given the nation’s debt load and fragile property sector. In the U.S., factory activity
unexpectedly contracted in August for the first time in three years,
underscoring how slowing global growth and an escalating U.S. trade war
with China are taking an even bigger toll on domestic producers.
“Trump’s goodwill gesture suggests that the trade war is
starting to bite and the U.S. may be more eager to close a deal,” said
Chua Hak Bin, an economist at Maybank Kim Eng Research Pte. in
Singapore. “The clock is ticking and Trump’s approval ratings are
sliding, with manufacturing now in recession.”
Despite the goodwill gestures, the two sides remain far apart on fundamental issues, and officials continue to trade barbs.
China wants the U.S. to remove all extra tariffs, and the U.S. has long
sought concessions on intellectual property and state-subsidies for
industry that Beijing has been unwilling to give.
“The negotiators have had a year to come to an agreement, and
they remain structurally at odds on key issues,” said Andrew Polk,
co-founder of research firm Trivium China in Beijing. “Another two-week
reprieve doesn’t change those fundamentals.” — With assistance by Shuping Niu, Steven Yang, Isis Almeida, Kevin Hamlin, John Harney, Yinan Zhao, and Miao Han
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