By Josh Zumbrun 

Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer made conflicting statements on Sunday over whether the Trump administration plans to move forward with tariffs on Chinese merchandise entering the U.S.

Treasury Secretary Steven Mnuchin said Sunday morning that the Trump administration would "put the trade war on hold," and delay tariffs on Chinese imports to the U.S., while the two countries hammer out details of a deal to reduce the yawning U.S. merchandise trade deficit with China.

And yet, hours later, U.S. trade representative Robert Lighthizer released a statement that seemed to contradict Mr. Mnuchin. Washington may still resort to tariffs, as well as other tools including investment restrictions and export regulations, unless China makes "real structural change" to its economy, Mr. Lighthizer said.

The mixed signals will further complicate a Trump administration trade agenda that has already taken on a number of challenging confrontations. While negotiating with China, the U.S. is also seeking to renegotiate the North American Free Trade Agreement with Mexico and Canada, and is negotiating with other trading partners over tariffs on aluminum and steel imports.

The contradictory statements from administration officials underscore differences among President Donald Trump's trade advisers over the negotiating strategy with China, and over how to present that strategy to the public. Mr. Mnuchin and Director of the National Economic Council Larry Kudlow appeared on Sunday morning talk shows to say the talks had been constructive, with Mr. Mnuchin saying they would lead to a "substantial" reduction in China's trade advantage.

Mr. Lighthizer, by contrast, is known as a tough, thoroughly experienced trade negotiator who has a reputation for holding a hard line. "Real structural change is necessary" on the part of China, Mr. Lighthizer said in his statement. "Nothing less than the future of tens of millions of American jobs is at stake."

Mr. Mnuchin said China and the U.S. are working on a deal that would "substantially" reduce the U.S. trade deficit with China, and that Commerce Secretary Wilbur Ross would travel to China to seek "very hard commitments" that would include substantial increases in Chinese purchases of U.S. agriculture and energy output.

"Getting China to open its market to more U.S. exports is significant," Mr. Lighthizer countered. "But the far more important issues revolve around forced technology transfers, cybertheft and the protection of our innovation."

The apparent tensions within the administration follow contentious negotiations in Washington last week between Chinese and U.S. negotiators seeking to address Trump administration concerns over the U.S.'s $375 billion trade deficit with China. The U.S. had demanded China reduce its trade advantage by $200 billion or more. China came to the talks ready to step up purchases of U.S. goods, but refused to agree to a specific dollar amount.

Mr. Mnuchin played down the significance of the Chinese not agreeing to reduce the deficit by $200 billion, saying that the transactions play out company-by-company, not through a single government purchasing decision, and that "ultimately this is about industry being able to have hard contracts and deliver these goods."

Liu He, the Chinese vice premier, led Beijing's delegation to Washington this week to try to end the escalating trade tensions between the two nations. Mr. Liu also touted the progress over the weekend, saying that "both sides agreed to avert a trade war and to stop imposing tariffs on each other," the official Xinhua News Agency reported.

Mr. Liu's visit to Washington followed a trip to Beijing earlier this month by Mr. Mnuchin and other top U.S. trade officials. But Mr. Lighthizer's statement indicated some on the U.S. side see the two sides as remaining far apart.

C. Donald Johnson, a former USTR negotiator and trade lawyer, said conflicting statements from Washington's negotiators don't help the U.S. position. "I know where (Chinese President) Xi Jinping and Lie He are coming from," said Mr. Johnson.

"But our side is so confused" which he attributed to "diversity on our side of the table" from trade hard-liners like Peter Navarro, director of the president's trade council, to more free-trade oriented officials like Mr. Mnuchin or Mr. Kudlow.

The two sides have been negotiating over a deal for the U.S. to ease restrictions on China's ZTE Corp., amid fears the telecom company could use its technology to spy on Americans via their phones.

ZTE was found by the U.S. government to have violated sanctions against North Korea and Iran, and the Commerce Department has forbidden U.S. companies from supplying parts to ZTE pending an official review. Officials have sent mixed messages over whether ZTE is part of the larger trade deal. President Trump has tweeted on the issue, noting this issue has come up in discussions with Chinese Premiere Xi Jinping. In his interview Sunday morning, Mr. Mnuchin said of ZTE: "This is an enforcement issue, not a trade issue."

While a deal to at least delay tariffs with China has been reached, the European Union is still facing the threat of U.S. steel and aluminum tariffs going into effect at the end of the month.

This week, the administration also missed a deadline from Speaker of the House Paul Ryan, who had said that if a new deal on the North American Free Trade Agreement wasn't reached by last Thursday, Congress might not have time to approve the deal this year. U.S. trade representative Robert Lighthizer said that day that Washington is " nowhere near close to a deal" with its partners in Canada and Mexico.

"The President is more determined to have a good deal than he's worried about any deadlines," said Mr. Mnuchin, regarding Nafta. The sides are "far apart, but our objective is still to get a deal."

Write to Josh Zumbrun at Josh.Zumbrun@wsj.com

(END) Dow Jones Newswires

May 20, 2018 17:08 ET (21:08 GMT)

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