Donald Trump raises China trade hopes with tariff delay
President Donald Trump said the US would delay an increase in tariffs on $200bn of Chinese goods set for March 1, averting an imminent escalation in tensions between the world’s two largest economies.
Mr Trump said in a tweet on Sunday that there had been “substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues”.
“I will be delaying the US increase in tariffs now scheduled for March 1,” he added.
Mr Trump also said that if “additional progress” were made between Washington and Beijing, his administration would plan for a new summit with Xi Jinping, the Chinese leader, at the US president’s Mar-a-Lago resort in Florida to “conclude an agreement”.
Mr Trump’s comments came at the end of a new round of negotiations between Robert Lighthizer, the US trade representative, and Liu He, the Chinese vice-premier, in Washington, which lasted through the weekend. US and Chinese negotiators have been criss-crossing the Pacific Ocean over the past two months to see if they can settle their trade dispute, building on an initial truce reached between Mr Trump and Mr Xi on December 1 following the G20 summit in Buenos Aires.
Mr Trump did not provide any further details on a potential future deadline for the tariffs increase. This would raise the punitive tariff rate on $200bn of Chinese imports from 10 per cent to 25 per cent, and would inflict much more severe damage on Chinese exporters, and US consumers, than has been the case so far.
In spite of Mr Trump’s optimism and praise for the talks from the official Chinese news agency Xinhua, which described the negotiations as moving towards a “win-win” solution, there was deep scepticism that real progress was being made or that Beijing was offering substantial concessions.
People briefed on the negotiations have been saying for weeks that the two sides remain far apart on issues such as technology transfer and how to ensure compliance with the agreement.
“While some compromise may be reached between the US and China on certain trade matters, the process is unlikely to be smooth and the US-China relationship should remain contentious, swinging between compromise and conflict, and involving frictions not only on trade, but also on technology, investment and geopolitics,” said Marie Diron, managing director at Moody’s Investors Service.
An extension in the trade talks and a delay in the tariff rise had been strenuously ruled out by senior US officials until earlier this month, when the possibility was first floated by Mr Trump. Previously, Mr Lighthizer had insisted March 1 was a hard deadline.
But due to the complexity of the trade issues being discussed — which seek to refashion what is arguably the most important economic relationship in the world — it became increasingly apparent that Mr Liu and Mr Lighthizer needed more time to craft a deal.
The move to delay the planned tariff increase marks the latest sign that Mr Trump is determined to reach an agreement with China to fulfil one of his campaign pledges and avoid any further disruption to the US economy as he starts his re-election bid.
But it is far from clear whether Mr Trump will be able to secure sufficient concessions from China on industrial subsidies, the protection of intellectual property, the end of regulatory restrictions on US investments, and other issues, that he and his negotiators have been seeking. The US has also been trying to find a mechanism to hold China to its commitments, one of the biggest sticking points in the talks.
“Planning a summit sends a strong signal that Trump expects to announce a deal . . . The major unknown is exactly how Trump’s deal would ultimately be enforced,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics.
The prospect that Mr Trump would settle for a limited deal — including a big boost in Chinese purchases of US goods, but not much more — has unnerved China hawks close to the US president inside and outside the administration. Democrats on Capitol Hill have also ratcheted up pressure on the White House not to cave in too easily to Beijing.
Chinese stocks surged into bull market territory following the announcement, with the CSI 300 index of major Shanghai and Shenzhen-listed stocks rising 5.9 per cent to its highest level since July, marking an almost 27 per cent gain since its recent nadir in early January.
“The optimism about US-China trade talks that has made a key contribution to the recovery in equity markets appears justified by confirmation that President Trump has extended the 1 March deadline,” said Ian Williams, analyst at Peel Hunt.
US business groups expressed relief that the rise in levies had been averted but were also keen to express the need for concrete results out of the negotiations.
“We welcome President Trump’s decision to delay the March 1 deadline on raising tariffs and are encouraged that US and Chinese negotiators continue to make progress towards a deal,” said Naomi Wilson, senior director of policy for Asia at the Information Technology Industry Council, a lobbying organisation in Washington representing top US technology companies.
She added that the group was “looking forward” to a deal that would tackle “market access restrictions, forced tech transfers, and unequal licensing opportunities for non-Chinese companies in China”.
Even in the most difficult moments of their trade war, Mr Trump and Mr Xi have said they have an amicable personal relationship that could nudge them towards a final agreement. A new summit at Mar-a-Lago would come roughly two years after Mr Trump hosted Mr Xi at his Palm Beach estate shortly after he took office in the White House. The US president had initially considered tagging on a summit with Mr Xi to this week’s visit to Asia, when he is due to meet Kim Jong Un, the North Korean leader, in Vietnam. With additional reporting by Michael Hunter in London