Compiled by Kevin Schulz
A weekend dinner meeting in Argentina between the presidents of the United States and China has resulted in what has been called a trade war “cease fire.”
According to an article by Roger Bernard with Informa, a dinner meeting between U.S. President Donald Trump and China’s President Xi Jinping resulted in the United States committing to not increasing tariffs on $200 billion in Chinese goods on Jan. 1, while China committed to make purchases of U.S. agriculture, energy and industrial products.
According to a White House statement, “President Trump has agreed that on Jan. 1, 2019, he will leave the tariffs on $200 billion worth of product at the 10% rate, and not raise it to 25% at this time. China will agree to purchase a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial and other product from the United States to reduce the trade imbalance between our two countries. China has agreed to start purchasing agricultural product from our farmers immediately.
“President Trump and President Xi have agreed to immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture. Both parties agree that they will endeavor to have this transaction completed within the next 90 days. If at the end of this period of time, the parties are unable to reach an agreement, the 10% tariffs will be raised to 25%.”
The Informa article reports that “statements in the press by Chinese officials and reports in Chinese media on the meeting did not acknowledge that 90-day period. The United States had been poised to increase tariffs on $200 billion in Chinese goods to 25% from an initial 10% level.
“The 90-day time frame given by the United States means the talks would wrap up around March 1, just before China’s annual national legislative session. The United States is demanding sweeping changes in China’s trade policy, which some observers believe the Communist government might find politically difficult to enact and impossible to enforce.”
The current trade war was brought on when President Trump imposed steel and aluminum tariffs earlier this year on many countries, including China. China then announced retaliatory tariffs against the United States on agriculture products such as soybeans and pork, among others.
The Informa article quoted Trump, speaking to reporters aboard Air Force One, calling the agreement an “incredible deal. What I would be doing is holding back on tariffs. China will be opening up. China will be getting rid of tariffs.” He reiterated the commitment by China to purchase a “tremendous amount of agricultural and other product” from the United States, saying it will have “an incredibly positive impact on farming.”
Lifting of tariffs against U.S. agriculture products would be welcome news to the U.S. livestock sector, and Dan Halstrom, U.S. Meat Export Federation president and CEO, says “USMEF supports the Trump administration’s efforts to finalize the USMCA and to continue seeking resolution of the metal tariffs dispute with Mexico and Canada, which resulted in retaliatory duties on U.S. pork and beef. U.S. meat exports have also become entangled in trade disputes with China, so it is encouraging to see the U.S. and China return to the negotiating table. Global demand for U.S. red meat is very strong, but exports cannot reach their full potential until the retaliatory duties imposed by Mexico, China and Canada are removed.” (The U.S.-Mexico-Canada Agreement was also signed at the G-20 summit in Argentina, set to replace the North American Free Trade Agreement.)
From the China side of things, the Informa article quotes Chinese Foreign Minister Wang Yi telling reporters in Argentina that the agreement “effectively prevented the expansion of economic frictions between the two countries. Facts show that joint interests between China and the United States are greater than the disputes, and the need for cooperation is greater than frictions.”
“China is willing to expand imports according to the needs of the domestic market and the people, including the purchase of marketable goods from the United States, and gradually ease the trade imbalance,” Wang said at a press briefing, according to a release from the Chinese government. “The two sides agreed to promote Sino-U.S. relations based on coordination, cooperation and stability. The two heads of state will maintain close contacts through visits, meetings, calls and communications to jointly lead the development of Sino-US relations. The two sides will conduct mutual visits again in due course. The two sides are willing to work together to promote exchanges and cooperation in various fields between the two countries to achieve more results.”
Wang also commented that the two sides agreed to “speed up” talks and work toward a removal of all tariffs and reach a win-win agreement that is mutually beneficial. However, from the U.S. side there has been no mention yet of speeding up the talks or seeking to remove all tariffs in place.
According to the China Economic Review, the United States’ promise to delay the 25% duties is more than was expected. “The most positive takeaway from the Xi-Trump meeting is that both top leaders seem to want a trade agreement. We think this does increase the chance of a further de-escalation of the US-China trade dispute,” says Wang Tao, head of UBS’s China research team.
There is doubt among analysts, however, as to the significance of the deal. Although officials have said that resolutions are being put forward to address bilateral tensions, there is still scant evidence that Beijing is tackling Washington’s principal complaints surrounding intellectual property theft and subsidies to state-owned enterprises.
According to the China Economic Review article, “Markets reacted positively to the news. China’s CSI 300 index of blue-chip stocks climbed 3.1% as trading opened on Monday. In Hong Kong, the Hang Seng China Enterprises index of mainland stocks was up 2.8%. The renminbi was also buoyed, up 0.6% in both onshore and offshore markets.”