Donald Trump’s tariff threats complicate US-China trade talks — “The current US administration is not trustworthy.”

Negotiators scramble to finalise agricultural and energy deals after president renews attacks

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Donald Trump’s latest threats are being seen by some simply as a negotiating tactic ahead of the next round of trade talks © Reuters

Tom Mitchell and Xinning Liu in Beijing

Donald Trump’s renewed tariff threats against Chinese exports have complicated efforts by US negotiators to finalise agricultural and energy deals ahead of a third round of high-level trade talks scheduled for Saturday, according to three people briefed on the negotiations.

They added that if the preparatory talks did not go well, weekend talks in Beijing between US commerce secretary Wilbur Ross and vice-premier Liu He could be cancelled. Chinese officials and analysts, however, remain cautiously optimistic that Mr Trump’s threats are politically inspired bluster that will not derail a larger trade deal between the world’s two largest economies.

They said Mr Trump’s surprise statement was consistent with his tendency to create uncertainty and pressure during business and political negotiations. It also fits with his general “America First” agenda that he promised voters would define his presidency.

“Trump is unpredictable, but also predictable,” one Chinese official said. “He has been a protectionist his whole life.” China’s commerce ministry issued a statement giving Beijing’s first official response to Mr Trump’s threat, saying it was “unexpected but also not a surprise”.

Wang Chong at the Charhar Institute, a Beijing-based think-tank, agreed that Mr Trump’s surprise statement was “just a threat”, adding that “China will still try its best to stop a trade war.”

Lester Ross, head of the policy committee at the American Chamber of Commerce in China and a partner at Wilmer Hale, described Mr Trump’s tariff threat as “fundamentally a negotiating step in advance of the next round of trade talks”.

“It’s part of an ongoing series of moves and countermoves,” he added.

The current US administration is not trustworthy, especially after Mnuchin just said we are [both] working on a framework to reduce trade friction.

A large group of US officials, including Treasury undersecretary David Malpass and agriculture undersecretary Ted McKinney, have arrived in the Chinese capital to finalise preliminary agreements relating to US exports of agriculture and natural gas. The agricultural talks are focused on existing technical barriers to US exports of chicken, pork, beef, rice and sorghum. US officials estimate that if these barriers are removed, American agricultural exports to China could double to $40bn.

In Tuesday’s announcement, Mr Trump pledged to announce tariffs on a final list of $50bn worth of Chinese industrial exports on June 15.

While the president’s threat appeared to reverse Treasury secretary Steven Mnuchin’s recent statement that a Sino-US trade war had been “ put on hold”, the actual implementation date was vague. In a statement released on Tuesday night, Beijing time, the White House said actual implementation of the tariffs would follow “shortly thereafter”.

“Trump’s statement put [the US team] in a tough position,” said one person briefed on the talks. “But this is pretty much the same place they were in two days ago. These tariffs were always in play and until they are implemented, they are on hold.”

While officials in Beijing understand that Mr Trump needs to defuse growing domestic political pressure over Chinese trade and investment issues, the US president risks backing his Chinese counterpart and Mr Liu into a similar corner.

In closed-door sessions with both Chinese and foreign officials over recent months, President Xi Jinping said that his administration did not want a trade war with the US but also warned that China “would respond if bullied”, according to three people briefed on the meetings.

When the US and China first threatened in early April to impose punitive tariffs on $100bn worth of bilateral trade, a senior Chinese commerce ministry official said both sides “were only putting everything on the table — it is time for negotiation and co-operation”.

But after Mr Trump then said he was considering imposing punitive tariffs on an additional $100bn worth of Chinese exports, officials in Beijing said they would not hold discussions with the US in the face of such threats. Formal talks between Mr Liu and his US counterparts did not get under way for another month.

“To evaluate Trump, you need to focus on what he does,” said Lu Xiang, an American affairs expert at the Chinese Academy of Social Sciences. “The current US administration is not trustworthy, especially after Mnuchin just said we are [both] working on a framework to reduce trade friction.” 

Mr Trump’s threat could also affect a quietly negotiated agreement in which his administration controversially said it would revise sanctions against a Chinese telecoms company, ZTE, in return for concessions including Chinese competition clearance of US chip company Qualcomm’s $47bn acquisition of NXP.

At the weekend Qualcomm and Chinese officials appeared to be closing in on a final agreement, according to people briefed on their discussions.

The delay has exacerbated concerns in China’s foreign investment community that such competition approvals can sometimes be used as bargaining chips. “China often delays handling larger international transaction [decisions] until after other major jurisdictions have acted,” said Mr Ross of AmCham China. “That puts China in a position . . . to impose remedies [and] industrial policy objectives may colour China’s decision-making process.”

https://www.ft.com/content/9c98ef28-63d8-11e8-90c2-9563a0613e56

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