WITH the eyes of the world on them, the United States and China came to an agreement that puts on hold their escalating trade war, reassuring business and rallying stock markets.
At the tail end of the weekend’s G20 Summit, delegations sat down to dinner to hash out an arrangement that would placate both sides.
The deal has averted US President Donald Trump’s January plans to hike tariffs on from 10 percent to 25 percent on US$200 billion of Chinese goods. In return, Beijing has agreed to buy more US products and start negotiations about intellectual property and technology transfer.
The goal of placating both sides appeared to have been reached as statements from both the White House and Beijing called the dinner “highly successful.”
But that’s not all the statements said.
Each statement emphasised different results, highlighting how far there is still to go in reaching consensus and demonstrating the gulf between Chinese and American expectations.
Chinese Foreign Minister Wang Yi mentioned there would be no tariff increase, but the White House lays out specific terms.
Trump’s tariff hikes will not be implemented on Jan 1, as initially planned. However, it is only a temporary reprieve as the US has set a 90-day time limit to reach a deal. Failing this, the 25 percent on US$200 billion of goods will be imposed.
China signalled its desire to scrap tariffs completely, saying leaders have asked their teams to speed up talks and work toward doing away with the measures.
It seems progress is being made on this front already, as Trump announced on Twitter on Monday that China has agreed to “reduce and remove tariffs on cars coming into China from the US. Currently the tariff is 40%.”
China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.
— Donald J. Trump (@realDonaldTrump) December 3, 2018
In a bid to even out the trade deficit, China has agreed to purchase a “very substantial, amount of agricultural, energy, industrial, and other product from the United States,” Sanders’ statement said.
It also said China had agreed to start this process immediately by buying agricultural products from American farmers.
By contrast, China says it is willing to import more goods based on the needs of the Chinese people, without stating a timeline for this to happen. There is no mention of the immediate purchase of agri-products.
At the core of America’s trade complaints is China’s unfair trade practices that put American companies operating in China on the backfoot.
According to the US, negotiations on intellectual property protection and forced technology transfers – when foreign multinational companies have to provide strategically significant technology to China – are to begin immediately.
“Non-tariff barriers, cyber intrusions and cyber theft” Are also to be discussed immediately.
China does not reference any of these issues specifically but simply says it will work with the US to reach consensus on “trade issues.”
According to the US, China’s President Xi Jinping is now “open” to approving the scuttled Qualcomm-NXP, a US$44 billion deal which fell apart earlier in the year when Chinese antitrust regulators did not approve it in time to meet a deadline.
In the Chinese statement, however, there is no mention of the deal let alone a possible approval.
Despite America’s optimism, a final deal may well be unlikely as both companies did stock buybacks and Qualcomm paid a US$2 billion breakup fee.
The US is clear that a 90-day timeline is in place for a deal to be reached. They have threatened to return to the maximum pressure approach of rising tariffs until China capitulates.
China’s statement made no mention of a timescale for negotiations.