By William Mauldin and Josh Zumbrun
WASHINGTON -- Trade talks between the U.S. and China are in danger of hitting an impasse, threatening to derail the Trump administration's plan for a limited "phase-one" pact this year, according to former administration officials and others following the talks.
Both sides remain divided over core issues -- including Beijing's demand for removing tariffs and the U.S.'s insistence on China buying farm products -- nearly six weeks after an "agreement in principle" was announced by the White House on Oct. 11.
"China is going to have to make a deal that I like," President Trump said Tuesday at a cabinet meeting. "If we don't make a deal with China, I'll just raise the tariffs even higher."
Mr. Trump is facing pressure from people within and close to the administration who blame the lack of progress on what they describe as Beijing's refusal to follow through on commitments at the bargaining table.
"Any impasse in the talks would likely result from an unwillingness by China to address longstanding U.S. concerns," said Stephen Vaughn, former top deputy to U.S. Trade Representative Robert Lighthizer who is now a partner at law firm King & Spalding in Washington. "The administration has been very clear about the changes it needs to see from China. Now China has to decide whether it is finally prepared to show real progress."
Stephen Bannon, the former White House chief strategist, believes the U.S. needs to keep tariffs in place as leverage to ensure China follows through on its promises. "The only constants in these negotiations are the Chinese backtracking and reneging, and Trump standing firm on his principles -- and his tariffs are key," Mr. Bannon said.
China's Ministry of Commerce said over the weekend that Vice Premier Liu He spoke with Mr. Lighthizer and U.S. Treasury Secretary Steven Mnuchin at the U.S.'s request, and the officials held "constructive discussions" about their concerns.
Mr. Lighthizer's office declined to comment on the delay in reaching a deal. The Chinese embassy didn't immediately respond to a request for comment.
Mr. Trump in October laid out a framework that involved large agricultural purchases by China, along with tighter Chinese intellectual-property rules and a currency pact in exchange for tariff relief. At the time, the president said a final deal would be finished in three to five weeks.
Since then, there have been few signs of progress. Terry Branstad, U.S. ambassador to China who was at the White House on Tuesday, was asked about the progress of talks. "They're going," he said.
Trade negotiators had originally hoped a deal could be signed by Mr. Trump and China's President Xi Jinping on the sidelines of an economic summit in Chile on Nov. 16-17. But that summit was canceled, effectively removing what had served as a de facto deadline.
Derek Scissors, a trade expert at the American Enterprise Institute who has advised the Trump administration said he doesn't expect the deal to close this month and sees a U.S. political battle over the president's call for a truce in the China trade war.
Looming now are plans by the Trump administration to impose 15% tariffs on smartphones, toys and other products from China on Dec. 15. The levies are expected to directly hit consumers as Mr. Trump gears up for his 2020 re-election campaign.
Not everyone is pessimistic, though. Some say the delay reflects the challenges inherent in even a limited accord.
"Trying to negotiate a tariff rollback is a complicated issue and takes longer than people in the market would like," said Clete Willems, who formerly worked on trade issues in the Trump administration and is now a partner at law firm Akin, Gump, Strauss, Hauer & Feld LLP.
Sen. Chuck Grassley (R., Iowa), chairman of the Senate committee that oversees trade, said he is taking at face value China's statement that senior officials had a productive call on Saturday. "I'm going to have to go by that as the latest report being positive news," Mr. Grassley told reporters.
Talks also hit an impasse in the spring, when the U.S. accused China of backing away from earlier commitments. The pact being negotiated at that time, however, was far more comprehensive than the much narrower agreement deal now on the table.
Although limited in scope, U.S. business groups see the current phase-one agreement as the key to unlocking Chinese concessions before advancing toward more meaningful economic overhauls by Beijing. These groups believe tariff rollbacks are a key to any deal.
China, for its part, is reluctant to commit to buying a specific amount of American agricultural products, The Wall Street Journal reported last week. When he announced the agreement in principle last month, Mr. Trump said China would buy between $40 billion and $50 billion of farm goods annually, but China has resisted specifying a dollar commitment.
Still, the Trump administration can't easily abandon the talks and impose more tariffs on China because such a move would risk hurting U.S. farmers further.
U.S. agricultural exports to China collapsed when the trade war heated up last year, with Beijing raising tariffs on such goods and directing companies to halt purchases of American commodities.
The moves sent the prices for U.S. commodities into a downward spiral and severely dented farm income. The U.S. Department of Agriculture initiated two large-scale rescue programs in 2018 and 2019, authorized at $28 billion, to mitigate the losses.
In recent weeks, China has stepped up agricultural purchases again as the two sides moved toward a limited deal. Last week, it said i t would allow chickens from the U.S. to be shipped to China for the first time in four years.
"The stakes are pretty high for Trump now of getting something because of the agriculture problem, because of farmers," said Rufus Yerxa, president of the National Foreign Trade Council.
The challenge for Mr. Trump is that farmers and key farm-state lawmakers are largely happy if a phase-one deal leads to China again buying large amounts of U.S. agricultural products. But if a deal falls through, China could again shut off its purchases and send U.S. prices into a new tailspin.
"When they talk about a purchase commitment of some magnitude, they're not talking about letting the purchases happen naturally, they're talking about state-directed purchases," said Craig Thorn, a partner at DTB Associates and a former official with the Foreign Agricultural Service of the USDA. That would mean the deal would "almost certainly concentrate on big-ticket commodities like soybeans and pork," he said.
But that would mean continued purchases -- on the scale the president hopes to see -- depends on keeping China engaged in the discussions.
--Alex Leary contributed to this article.
Write to William Mauldin at email@example.com and Josh Zumbrun at Josh.Zumbrun@wsj.com
(END) Dow Jones Newswires
November 19, 2019 18:41 ET (23:41 GMT)
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