Trump offers Xi tariffs reprieve in trade war ceasefire
US president agrees to hold off on higher imports due in January to give talks more time
Donald Trump, the US president, has agreed to hold off on imposing higher tariffs on Chinese imports next year after reaching a deal with Xi Jinping, China’s president, to stall the trade war afflicting both countries and rattling financial markets.
The temporary ceasefire was reached after a working dinner involving the two presidents and their top advisers in Argentina, following the end of the G20 world leaders summit on Saturday.
According to the terms of the deal outlined by the White House, the US will not ratchet up tariffs on more than $200bn of Chinese goods from 10 per cent to 25 per cent in January, as had been planned.
Meanwhile, China would move to purchase a “very substantial” amount of farm, energy and industrial goods, though the amount was not specified, in order to reduce the trade gap with the US. The US also said the two countries would begin negotiations to resolve some of the thorniest issues in their economic relationship, like alleged intellectual property theft and the forced transfer of technology. They set a deadline of three months for those talks, with failure resulting in a new escalation of tariffs.
China’s state-run Global Times quoted Wang Yi, China’s foreign minister, as telling a G20 press conference: “China is willing to expand imports on the basis of its own needs, agrees to open its market and satisfy the legitimate concerns of the United States as part of the process of reform and opening up.”
Mr Trump and Mr Xi entered the critical summit at the Park Hyatt hotel — where the US president was based — on an upbeat tone, suggesting a truce in trade tensions between the two countries was within striking distance. Afterwards, once he was in flight back to Washington on Air Force One, Mr Trump issued a positive statement. “This was an amazing and productive meeting with unlimited possibilities for both the United States and China,” he said.
Mr Xi, in opening remarks at the dinner, said it was a “great pleasure” to see Mr Trump. “A lot of things have taken place in the world,” he said. “Only with co-operation between us can we serve the interest of both peace and prosperity.”
The delegations were arranged around a long rectangular table, with a crystal chandelier hung above it and a row of flowers down the middle. The main course was grilled sirloin with red onions, goat ricotta, and dates. The wine was a Malbec.
The agreement pauses a trade conflict that was already showing signs of inflicting serious damage to the economies of both the US and China, denting global growth forecasts and causing turmoil and volatility in financial markets.
Mr Trump entered the dinner facing trouble at home, following the loss of the House of Representatives for the Republican party in midterm elections, and new activity in the probe by special prosecutor Robert Mueller into his 2016 election campaign. But despite these pressures, there are no guarantees that the ceasefire will last — so the possibility of a new escalation is likely to hang over Washington and Beijing until there is a more solid resolution.
Abigail Grace, a China expert at the Center for New American Security said the agreement was a “time out” for both countries. “Expect a public cooling period for the next three months, with tough discussions between two bureaucracies taking place behind the scenes. The trade war is far from over yet,” she said.
Mr Trump has shifted between bluster and compromise on trade depending on his impulse and the political priorities of the moment. Within the space of two months he struck agreements to ease trade tensions with the EU and Japan and revamp the North American Trade Agreement with Canada and Mexico.
China was always considered a much tougher challenge, however. Confronting Beijing on trade was a centrepiece of his successful presidential campaign in 2016 and became a leitmotif of his time in office. This has been particularly true this year after his efforts at dialogue with Mr Xi during his first few months at the White House faltered.
As Mr Trump took an increasingly tough line against China, ratcheting up tariffs and the threats of more tariffs, he was encouraged by hawks within his own administration, particularly Peter Navarro, the White House trade adviser, and Robert Lighthizer, the influential US trade representative.
On the other side of the internal divide, however, Steven Mnuchin, the Treasury secretary, and Larry Kudlow, the director of the National Economic Council, have been more willing to consider a deal. All four were present at the negotiating table with Chinese officials in Buenos Aires. Prominent Wall Street figures, including Steve Schwarzman, the chief executive of Blackstone, had also worked behind the scenes for a compromise.
Mr Trump’s own views have always been more difficult to pinpoint, leaving officials from both sides guessing until the end. But Mr Trump had claimed to have a strong personal relationship with Mr Xi, which optimists had often cited as a factor that might lead to a breakthrough.
After a sharp drop in equity markets in October, Mr Trump made an overture to Mr Xi in a phone call that relaunched talks after a lengthy hiatus. He then instructed staff to see if it might be possible to reach some form of deal at the G20 in Buenos Aires, or at least a framework to resolve some of the sources of tension with Beijing.
But until the past week, Chinese officials had offered few meaningful concessions to Mr Trump, leading the White House to dampen expectations of an agreement and even threaten a burst of new levies in the near future. The tone from the US side became more positive as they landed in Argentina, with Mr Trump claiming that he was seeing “good signs” in the talks.
Other aspects of the deal included commitments by Mr Xi to designate fentanyl, the opioid, a controlled substance, meaning harsher sentences for those selling it to the US, and to be “open” to approving the merger of chipmakers Qualcomm and NXP, which China had been blocking.
Hardliners within the administration are likely to grow impatient if the next round of talks does not yield more concrete results, and there were already some signs of a backlash to the truce from some of Mr Trump’s supporters who are most hostile to China.
“Is #Trump making a huge mistake? The devil is in the details! But I’d be lying if I didn’t say at first glance this is very disappointing,” wrote Dan DiMicco, a steel executive who led Mr Trump’s trade unit during the presidential transition. “I don’t agree but I defer to the president,” he said. However, business groups are likely to be relieved that at least any further escalation was avoided for now.