China ‘needs firmer US commitments on lifting tariffs’ if Donald Trump wants to seal a trade deal

Wendy Wu

Beijing wants Washington to make a solid commitment towards removing tariffs, saying that without this move a visit to the US by President Xi Jinping would be politically difficult, according to a source familiar with internal government discussions.

The two sides are trying to hammer out details of an initial agreement – described by US President Donald Trump as the “phase one” deal – to de-escalate the protracted trade war.

Speculation has mounted about where and when Xi and Trump will meet to sign the deal after Chile cancelled the Asia-Pacific Economic Cooperation summit, which both men were due to attend next week.

US officials have suggested Iowa, Alaska and Hawaii as possible locations for a meeting between the pair.

However, a person familiar with the internal government discussions said there were still concerns that China might have made too many concessions while the United States should have been more responsive to China’s key concerns.

“The deal is not balanced yet,” the person said, declining to be named because of the sensitivity of the issue.

On Tuesday, a commentary published by Taoran Notes, a social media account affiliated with state-run outlet Economic Daily, said that the removal of tariffs was China’s innermost core concern no matter whether the deal was a phased one or final one. It warned that misjudgments on the matter would lead to further reversals in the negotiations.

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In the previous round of trade talks – which collapsed in May when both sides were trying to iron out the detailed text of a 150-page deal – China was close to securing the removal of most of the tariffs except for a small portion of China’s manufacturing products.

If the two sides do reach an interim deal, which could happen as early as the middle of this month, there is a broad expectation that the US will suspend the 15 per cent tariffs on US$160 billion of Chinese products, including laptops and smartphones, that are due to take effect on December 15.

US media outlet Politico reported that China was also demanding that the US remove 15 per cent tariffs on US$112 billion of Chinese products that came into force on September 1 and reduce 25 per cent tariffs on a range of other goods.

The US has already started to grant tariff exemptions for goods subject to the September 1 duties, but the source said that was not enough to ensure a deal.

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“The US needs to give a more solid commitment to China on the tariff issue. At least the US should drop the December 15 tariffs or stop labelling China as a currency manipulator to show dignity to China,” the person said.

“They still lack mutual trust, and it depends on who is more eager to reach a deal.

“But now it is a political decision rather than a technical solution to the trade deal text.”

In August, Trump reacted furiously to a fruitless round of trade talks the previous month and announced fresh tariffs against Chinese goods and officially branded the country as a currency manipulator.

The ensuing stalemate lasted a month before each side made goodwill gestures to revive the talks – China agreeing to resume purchases of agricultural goods and the US delaying new tariffs that were due to take effect in October.

Any phase one deal would include an agreement on agricultural products, but may not include Chinese energy purchases from the US, according to two people familiar with the issue.

China is also expected to agree to open up its financial markets and address restrictions on genetically modified American food, while the US is expected to announce the removal of some tariffs.

If the implementation of the phase one deal is satisfactory, the two countries could start to touch on thorny structural reforms, such as how to strengthen intellectual property protections for US companies operating in China and industrial subsidies, “since those reforms are in accordance with China’s own needs”, one of the sources said.

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But reforming state-owned enterprises and easing controls over the internet would be left until even later in the process, the source continued.

Wang Yong, a professor of international relations at Peking University, said “it’s now the time to reach an initial deal” and both countries needed more than ever to reach a deal to lay down the foundations for more complicated negotiations.

“The US should respond more clearly to China’s core concerns, with more specifics and more commits on the tariff issue,” Wang said.

“If the Chinese leader is going to sign up for it, the deal should be balanced and respect China’s concerns.”

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