US, China Reach Partial Trade Deal; Avoid Tariff Increase

By Nike Ching

U.S. President Donald Trump announced Friday that Washington and Beijing had reached a substantial phase-one trade deal, covering agricultural purchases, currency and some aspects of intellectual property protections.

China would increase significant purchases of U.S. agricultural goods and agree to certain intellectual property measures and concessions related to financial services and currency. In exchange, the U.S. would delay a tariff increase.

At the meeting with Chinese Vice Premier Liu He at the White House, Trump said he and Chinese President Xi Jinping might sign the first phase of the trade agreement on the sidelines of the Asia-Pacific Economic Cooperation meetings this November in Chile.

As part of the deal, China would agree to some agricultural concessions and the U.S. would provide some tariff relief.

Tariffs

The partial trade deal would avert a tariff escalation.

A current 25% levy on $250 billion of Chinese goods was targeted to increase to 30% October 15, and a second set of taxes of 15% on more than $150 billion in goods was set to go into place December 15.

U.S. Treasury Secretary Steven Mnuchin said Trump had agreed not to proceed with the tariff hike October 15.

But U.S. Trade Representative Robert Lighthizer said Trump had not yet made a decision about tariffs that were to go into effect December 15.

China has signaled retaliation if the U.S. follows through on those increases.

Some analysts warned there should be no illusions that a final, comprehensive trade deal would be easy to draft.

“Both sides are still very far apart and even this small agreement could still collapse in the weeks and months to come,” Harry Kazianis, a senior director at the Center for the National Interest, said.

Others, such as Brookings Institution’s senior fellow David Dollar, said a pause of the ongoing trade war is still a good thing.

In a tweet, Dollar said: “The deal stops tariff escalation in return for some agricultural purchases. All the hard negotiations are still ahead. Still, better to have a truce.”

Sticking points in the trade dispute between the world’s two largest economies include forced technology transfer, theft of intellectual property rights and other nontariff barriers.

Aside from the trade talks, Washington is looking at options to squeeze Beijing’s access to American capital markets, including limiting U.S. federal retirement funds from investing in Chinese state-owned companies involved in espionage, human rights abuses and “Made in China 2025” industrial policy.

“The idea we’re going back to a peaceful, harmonious, happy U.S.-China relationship, I think that’s over,” said Michael Pillsbury, who is the director for Chinese Strategy at the Hudson Institute and seen as a Trump confidant on China issues.

Pillsbury, who returned from a recent trip to Hong Kong and China, said the Beijing government is on high alert about the potential restriction of capital flow between the U.S. and China, as part of a broader trade war.

Security issues

And as the U.S. and China eye a path forward on trade, high-level talks on security issues continue to remain on hold, amid the trade dispute.

There is no indication of an immediate U.S. plan to resume the annual Diplomatic and Security Dialogue (DSD) with China.

“The United States seeks a constructive, results-oriented relationship with China,” a State Department official told VOA, when asked what Washington wants from Beijing in order to move forward with bilateral talks on diplomatic and security issues.

“We have nothing further to announce at this time,” the official added.

Analysts say the U.S. approach to China limits the possibilities for serious cooperation between the two countries.

“The diplomatic side is problematic due to the broad tendency of the Trump administration to eschew diplomacy and instead rely on sanctions or tariffs or unilateral demands,” Atlantic Council Senior Fellow Robert Manning said.

“The Trump administration has a different strategy. It isn’t using dialogues that it believes served China’s advantage,” said Bonnie Glaser, director of the China Power Project at the Center for Strategic and International Studies.

The topic of China came up in meetings during U.S. Secretary of State Mike Pompeo’s recent trip to Europe, according to senior State Department officials, who added there is an “awakening” in Europe about the threats posed by Beijing.

Previous talks

Washington and Beijing held the last round of Diplomatic and Security Dialogue in November 2018. It is one of the four bilateral talks initiated under Trump’s administration. The others are the U.S.-China Comprehensive Economic Dialogue, Law Enforcement and Cybersecurity Dialogue and Social and Cultural Issues Dialogue.

The U.S. and China last held major trade talks in July, but there was no major breakthrough.

Washington and Beijing have been engaged in a series of escalating tit-for-tat tariffs for more than a year, sparked by Trump’s initial demand for changes in China’s trade, subsidy and intellectual property practices. China says U.S. trade policies are aimed at trying to stifle its ability to compete.

Doug Barry, a spokesman for the U.S.-China Business Council, said the moderate voices appear to be prevailing, at least this week, while hard-liners in the Trump administration are unlikely to “go away” for the foreseeable future.

“What’s surprising is that the two sides have at least for the moment anyway put aside some of the more difficult issues and seem to be focusing on a short-term win here,” Barry told VOA.

“One would hope then that some confidence will be restored on both sides and there will be an opportunity to deal with these more vexatious issues in the future,” he added.

Ira Mellman contributed to this report.