US and China near trade deal lowering tariffs
The US and China were closing in on a limited trade deal including a reduction in existing tariffs that have weighed down the world’s two largest economies for months, according to people familiar with the White House position.
Hopes for such a pact pushed US stocks to record highs on Thursday, as investors cheered the imminent easing of tensions between Washington and Beijing. President Donald Trump foreshadowed a deal on Thursday morning in a tweet: “Getting VERY close to a BIG DEAL with China. They want it, and so do we!”
For more than two months, officials in Beijing and Washington had been attempting to strike such a truce in their trade conflict, but struggled to bridge their differences.
The talks accelerated in recent days after the US offered to roll back a chunk of existing tariffs on Chinese goods, meeting a key demand from Beijing, and prepared to remove the threat of new tariffs on $156bn of Chinese consumer goods, due to take effect on Sunday.
In exchange, China committed to large annual purchases of US farm goods and made pledges related to intellectual property and currency.
Mr Trump and his advisers discussed the terms of the settlement with Beijing on Thursday afternoon, but there was no word from China on the likely agreement. One person familiar with the talks said the US had been close to reaching a deal on previous occasions only to see it collapse at the last minute.
The S&P 500 finished 0.9 per cent higher while the Nasdaq Composite added 0.7 per cent. The Dow Jones Industrial Average rose 0.8 per cent to be within reach of its November 27 record. That helped push the MSCI All World index 0.8 per cent higher to a new peak.
China’s foreign ministry did not confirm whether a deal was close but said the positive market reaction showed that an agreement would be in the interest of both sides.
“It’s what the international community wishes for. China is committed to resolve and manage the differences,” said a spokesperson for China’s foreign ministry.
The impending deal with China came just days after the US president notched up another big trade milestone by reaching a compromise with Democrats to allow congressional approval of USMCA, the revision of the Nafta deal with Canada and Mexico, which had been stalled on Capitol Hill for a year.
The deal under consideration with China is far from the comprehensive pact that Mr Trump has promised. Beijing has been unwilling to overhaul its economic policies in key areas, such as its use of industrial subsidies and practices ranging from cybertheft to the forced transfer of technology from US companies to domestic competitors. US officials have suggested these would be tackled at a later stage, but it is unclear whether this might happen before the US presidential election in 2020.
The US has for weeks been considering rolling back some of the tariffs it has imposed on $360bn of Chinese goods since the trade war began in March 2018, easing some pressure on the US economy as Mr Trump heads into his re-election battle.
But China has resisted firm commitments on agriculture, pushing for them to be based on market forces, in compliance with World Trade Organization rules, rather than the fixed $40bn to $50bn annual amount sought by Washington, according to people familiar with the matter.
China hawks on Capitol Hill baulked at the prospect of the Trump administration moving towards a deal.
“[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 such as subsidies to domestic firms, forced tech transfers & blocking US firms access to key sectors,” Marco Rubio, the Florida Republican senator, said on Twitter on Thursday.
James Politi and Demetri Sevastopulo