U.S. Settles on Outline of Elusive Trade Deal

U.S. Settles on Outline of Elusive Trade Deal
By: WNG NYT Posted On: December 12, 2019 View: 46

U.S. Settles on Outline of Elusive Trade Deal

WASHINGTON — The United States has settled on final terms of a partial trade deal with China, moving both countries closer to signing a pact that President Trump originally announced in October, four people familiar with the negotiations said.

Mr. Trump met with his top economic advisers Thursday afternoon at the White House to discuss an arrangement that would reduce by half the overall rate on the tariffs he has placed on $360 billion of goods, in return for Chinese commitments to buy American agriculture and other concessions, the people said.

The president was widely expected to announce as early as Friday that he would delay or cancel new tariffs that were scheduled to go into effect on Sunday on $160 billion of consumer products from China. On Thursday morning, he said on Twitter that the United States was closing in on a deal.

“Getting VERY close to a BIG DEAL with China. They want it, and so do we!” the president wrote.

Mr. Trump has yet to make an official announcement about progress on the deal or the tariffs he had planned for Sunday. The administration is expected to make an official policy announcement on Friday. Both sides have said before that they were on the verge of an agreement, only for the talks to collapse.

Michael Pillsbury, a China scholar at the Hudson Institute who advises the White House on trade, said that he had spoken to the president on Thursday afternoon about the agreement.

“This is a historic breakthrough,” Mr. Pillsbury said, attributing the agreement to the strong relationship between Mr. Trump and his Chinese counterpart, President Xi Jinping.

Mr. Pillsbury said that the agreement included a rollback of some of the tariffs that Mr. Trump has imposed on China in exchange for China bolstering its annual purchases of American products to about $50 billion next year. As part of the pact, Mr. Pillsbury said, China would also enforce stronger protections for American intellectual property, open its markets to American financial institutions and commit to greater transparency surrounding the management of its currency.

The second phase of the agreement, which Mr. Pillsbury said would include changes to China’s industrial policy, will be addressed after the 2020 election.

The Chinese Embassy in Washington directed inquiries to the Ministry of Commerce in Beijing.

Stocks rose to a record on Thursday, with the S&P 500 gaining nearly 0.9 percent, and the yield on the 10-year Treasury note touched 1.91 percent, the highest level in almost a month.

The benchmark has been trading in record territory as investors anticipate a de-escalation of the trade war, and amid signs that the domestic economy is holding up.

“We’re encouraged that China and the United States seem on the verge of a breakthrough on the Phase 1 negotiations,” said Myron Brilliant, the executive vice president of the U.S. Chamber of Commerce. “If accurate, it would be a positive first step in improving our commercial relationship at a time of great uncertainty.”

But the backlash from China skeptics started even before any official announcement had been made.

Senator Marco Rubio, Republican of Florida, tweeted that the White House “should consider the risk that a near-term deal with #China would give away the tariff leverage needed for a broader agreement on the issues that matter the most.” Those issues included the subsidies China provides to its industries, its forced acquisition of American technology and the barriers it has built to American firms, Mr. Rubio said.

On Thursday, three powerful Senate Democrats, including Chuck Schumer of New York, sent a letter to Mr. Trump, warning that any first-phase deal that did not include meaningful changes to the way China structured its economy would be “a severe and unacceptable loss for the American people.”

Some mocked the president for solving a crisis of his own making.

“China Phase-1 deal is the equivalent of a gunman, who had taken hostages, surrendering to authorities, with no one killed, but his manifesto never published,” Jorge Guajardo, the former Mexican ambassador to China, tweeted. “No harm done to anyone, back to normalcy, madman contained, but the shopping mall lost a lot a customers during standoff.”

For a year and a half, Mr. Trump has alternated between praising China and ratcheting up tariffs on the country as he tried to press Beijing for trade concessions. In October, Mr. Trump announced that the United States and China had reached an agreement in principle on the first phase of a trade deal. But in the weeks since, a concrete agreement proved elusive as the two countries grappled over its precise terms.

Chinese negotiators pushed their American counterparts to remove as many of the existing tariffs as possible, while the Trump administration pressed China to make more purchases of soybeans, poultry and other goods to help relieve the pressure the trade war had put on American farmers. Mr. Trump also wants China to buy more American products to help narrow the trade gap between what the United States sells to China and what it imports.

To ensure that China keeps its commitments, the Trump administration has insisted on quarterly reviews, as well as an agreement that China’s agricultural purchases would not drop below a certain amount. If China violates the terms of the agreement, tariffs that the Trump administration had removed would snap back into place.

China has been willing to discuss purchases of American agriculture, especially since a disease has devastated its swine population and led to spiraling pork prices. But in previous discussions, Chinese negotiators had pushed back against promising set purchase amounts far into the future, saying such an arrangement could anger its trading partners and violate its commitment to the World Trade Organization to treat all members equally.

In recent months, American and Chinese officials have been locked in a contentious discussion of what proportion of American concerns about Chinese economic practices are being addressed in the Phase 1 deal, and whether a corresponding proportion of Mr. Trump’s tariffs should be rolled back. The Chinese had enumerated the American requests into a list of more than 100 items, and have argued that if they resolve half of them, then half of Mr. Trump’s existing tariffs should be removed.

Some American analysts have criticized the approach, saying a significant reduction could leave the United States with less leverage for the second- and third-phase discussions that are planned, in which even more difficult subjects like Chinese subsidies would be included. They also point to the depreciation this year in China’s currency, the renminbi, saying that drop would almost offset the effect of the tariffs.

But others say an across-the-board reduction in the rate of all existing tariffs does offer the Americans some advantages, including not having to pick and choose among industries that would receive tariff relief.

The last tranche of tariffs, scheduled to go into effect at 12:01 a.m. on Sunday, would extend levies to cover nearly every shoe, laptop and toy that the United States imports from China — a total of $539.5 billion of merchandise last year. Companies have been eagerly watching to see whether the administration would issue the official announcement that will stop those levies from going into effect.

Many of Mr. Trump’s advisers have been wary of increasing tariffs on China as negotiators from both sides are trying to reach agreement on the first phase of a trade deal. Still, the urge to delay the tariffs — or to reach a deal — has not been unanimous. Peter Navarro, Mr. Trump’s hawkish trade adviser, circulated a memo this week that makes the case for forging ahead with additional tariffs and delaying any deal until after the 2020 election.

On the Chinese side, Thursday’s agreement appears to represent a big victory for the more nationalistic wing of the Chinese government, which has argued consistently that the Trump administration will back down to a considerable extent on tariffs if Beijing stands firm.

Ana Swanson and Alan Rappeport reported from Washington, and Keith Bradsher from Beijing. Matt Phillips contributed reporting from New York.

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