President Trump Is Expected to Sign Off on Limited Trade Deal with China

Date : 12/12/2019 @ 10:37PM
Source : Dow Jones News

President Trump Is Expected to Sign Off on Limited Trade Deal with China

By Lingling Wei and Bob Davis 

President Trump is expected to sign off on a limited agreement aimed at ending the trade war with China that would prevent new tariffs planned for Sunday and roll back some existing tariffs, according to a person familiar with the matter.

Mr. Trump met top economic and trade advisers on the agreement for an hour Thursday, and senior administration officials were making calls to tout the outlines of an agreement that they hope to confirm with Beijing as early as Friday, the person said.

A spokesman for the Chinese embassy didn't immediately respond to a request for comment.

Mr. Trump declared two months ago that the two countries had reached a framework for a limited "phase one" pact to halt the trade war and allow negotiation on possible future phases to address bigger concerns of American businesses.

But efforts to finalize the terms proved elusive until Thursday, just days before the new tariffs targeting iPhones, toys and other consumer goods were set to take effect.

Trade groups hailed Thursday's progress as a welcome respite from what amounts to additional taxes at the border. Importers, retailers and other American firms worried more duties -- essentially a U.S. tax charged at the border -- will have the effect of raising prices or hurting sales.

"We welcome the news that a U.S.-China phase one deal is imminent," said Myron Brilliant, executive vice president and head of international affairs at the U.S. Chamber of Commerce. "It will bring stability to the U.S.-China relationship, but make no mistake about it: There is still more work ahead and more problems to be solved."

President Trump wrote in a tweet on Thursday morning: "Getting VERY close to a BIG DEAL with China. They want it and so do we!"

The offer to reduce tariffs was made in roughly the past five days, the people briefed on the matter said, and in exchange, the U.S. side has demanded Beijing make firm commitments to purchase large quantities of U.S. agricultural and other products, better protect U.S. intellectual-property rights and widen access to China's financial-services sector.

Should China not carry out its pledges as part of the potential deal, the tariff rates would return to their original levels, a clause known in trade talks as a "snapback" provision.

Negotiations have ground on. During several rounds since October, Chinese negotiators have balked at Washington's request that Beijing guarantee its pledge to buy more U.S. soybeans, poultry and other products, saying doing so would violate World Trade Organization rules.

"Trade teams from both sides are maintaining close communications," Gao Feng, spokesman at China's Commerce Ministry, said at a news briefing Thursday, without elaborating.

Details of the new U.S. plan emerged as the clock runs out for the two sides to reach an agreement before 12:01 a.m. Sunday -- the date Mr. Trump has set for tariffs to increase on an additional $156 billion of Chinese goods. Officials in Beijing and Washington have indicated that negotiations could be extended beyond that date, as has happened several times when the two sides believed they were close to a deal.

None of the trade truces declared in the past two years have stuck and uncertainty around trade between the world's two largest economies has weighed on global growth.

Wary of what they regard as Beijing's poor record of following through on its pledges, U.S. negotiators led by U.S. Trade Representative Robert Lighthizer have asked China to commit in writing to some agricultural purchases up front and to agree to a detailed timeline for future purchases. The U.S. has also been pressing China to commit in the text of the deal to a quarterly review of promised purchases and specify that the purchase amount wouldn't drop by 10% in any given quarter.

The U.S. has imposed tariffs on Chinese goods in phases over the past two years. The U.S. currently imposes 25% tariffs on about $250 billion of Chinese goods and 15% tariffs on an additional roughly $111 billion. Those rates would be slashed by as much as half under the terms of Washington's latest offer but would return to their original levels if China fails to deliver on its promised purchases.

Chinese negotiators have been reluctant to meet U.S. demands during recent discussions. They worry that guaranteed purchases would cause friction with China's other trading partners. In addition, Chinese officials have argued that the purchases should be based on market prices and organic demand from Chinese companies. For example, Brazil is offering soybeans at lower prices than the U.S., and buying from the U.S. at higher prices would disadvantage Chinese buyers.

The new tariff-reduction offer is designed to enable Washington to retain some of its leverage over Beijing, even while extending an olive branch. If a near-term deal were reached and the U.S. reduced its tariff rates across the board, for example, some levies would still remain in place and could be used to push Beijing to carry out its promises and continue discussions.

But a deal along these lines is bound to draw criticism in the U.S. as ceding too much leverage. Reduced tariffs of 7.5% or 12.5% are much easier for exporters and importers to handle and might not be enough to compel Beijing to change core policies of its economic model.

Many of the toughest issues are still to be resolved. They include China's subsidies to domestic firms, restrictions on foreign access to fast-growing sectors like cloud computing and an end to Chinese pressure on U.S. firms to transfer technology to their Chinese partners.

Both Xi Jinping, China's president, and Mr. Trump could frame such a near-term deal as a win.

Mr. Trump would be able to argue that he secured a guarantee of large-scale purchases from Beijing while keeping the tariff pressure on China.

Mr. Xi, meantime, would be able to point to a slashing of existing tariffs, which would serve as a much-needed boost to the slowing Chinese economy. The trade war with the U.S. has caused China's exports to the U.S. to tumble and businesses to delay investments.

During recent talks, Chinese negotiators led by Vice Premier Liu He have asked their counterparts not only to cancel the planned December tariffs but also to roll back existing levies -- a demand the U.S. had resisted until recently.

"The ball is in China's court now," said one of the people briefed on the U.S. offer.

Having what is widely regarded as a balanced agreement remains a priority for the Chinese negotiators and for the country's leadership. Beijing walked away from a nearly completed deal in early May because it felt that the text of the agreement was too lopsided in Washington's favor. That led the Trump administration to ramp up its trade offensive against China, which then hit back, exacerbating a cycle of mutual retaliation.

Having consolidated power considerably in recent years, Mr. Xi has largely staked his credibility as China's most powerful leader in a generation on his image as someone willing and able to stand up to foreign pressure.

In recent weeks, tensions have continued to rise between Washington and Beijing, triggered by two bills in the U.S. Congress supporting human rights in Hong Kong and Xinjiang. Aggressive media coverage in China targeting the U.S. is further fanning nationalist sentiment on the mainland, making officials ever more sensitive about even the appearance of caving to American pressure.

--Alex Leary in Washington contributed to this article.

Write to Lingling Wei at and Bob Davis at


(END) Dow Jones Newswires

December 12, 2019 17:22 ET (22:22 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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