A White House statement said Washington and Beijing agreed to “immediately begin negotiations” to address U.S. concerns about Chinese forced technology transfer, intellectual property protection, nontariff barriers, agriculture, services and cyber practices, and both parties will “endeavor to have this transaction completed within the next 90 days.”
The trade war could again intensify if the U.S. and China don’t reach agreement on IP and other trade concerns within the time frame or the parties could extend the tariff deferral for another period of time if the talks make incremental progress, said Douglas Holtz-Eakin, president of American Action Forum, a conservative think tank.
The Chinese statement said both sides agreed not to impose additional tariffs, but did not provide any timeline or include any contingencies associated with the tariff deferral.
“Those who were in the room reported different things,” Holtz-Eakin said during an interview with American Shipper. “The Chinese came out thinking there were no contingencies, and the U.S. said, ‘Well, you know, we might not get rid of all the tariffs, and we might do the tariffs again after 90 days,’ and no one knows what the standards for progress are.”
The two sides don’t seem very close on the underlying issues, and China can’t give the Trump administration the full concessions it wants without getting anything in exchange, said Simon Lester, associate director of the Herbert A. Stiefel Center for Trade Policy Studies at the libertarian Cato Institute.
The U.S. filed a WTO dispute against Chinese IP policies in October, after consultations requested by the U.S. in March failed to resolve its concerns.
“I just don’t know that there’s really a deal to be had here,” Lester said. “I give it 50-50 that we’ll go a 90 ninety days with no more tariff increases, but at that point, I think we just go back to the same sort of tariff escalation.”
Lester said that’s his instinct for how developments will play out, but noted that given the uncertainty of the situation, it’s tough to rest easy on any prediction.
He called for the U.S. to respond through defensive measures and through setting a new economic strategy and priorities, akin to policies in the late 1980s that emphasized investments in research and development, modern infrastructure, education, and training, as well as through a trade policy that promotes exports.
Holtz-Eakin pointed to U.S.-EU talks as precedent for how U.S.-China talks could play out, with both sides offering general commitments to hold off on tariffs as long as negotiations are advancing positively.
European Commission President Jean-Claude Juncker during a visit to Washington in July agreed with Trump to hold off on any additional tariffs while their governments continue to progress in trade negotiations. The U.S. and EU are currently discussing regulatory cooperation, with an eye toward negotiating a potential trade agreement that would lower tariffs on nonautomotive industrial goods.
The White House statement says China agreed to start buying agricultural products from U.S. farmers “immediately,” after consenting to buy 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’s decision to buy farm products and its “willingness” to discuss further reductions on agriculture and energy tariffs follows similar commitments of past talks, he said.
For stockpiling purposes, Chinese demand for U.S. goods could be “very high” through March 1, “but of course that’s only a temporary respite for U.S. ag,” Derek Scissors, resident scholar for the American Enterprise Institute, a conservative think tank, wrote in an email.
Moreover, it’s important to keep in mind that China hasn’t agreed to remove its tariffs on several U.S. commodities, including soybeans, and there’s still no guarantee that U.S. soybeans will recapture lost market share, Holtz-Eakin said.
“The tariffs are still in force,” he said. “There’s nothing that went away that would give a Chinese importer a reason to look at the U.S. again. All they said was, ‘We will buy more.’ How will that happen? I don’t know.”
Bilateral talks to resolve underlying U.S. concerns around Chinese IP theft and forced tech transfer haven’t made much progress up to this point, Scissors wrote in a blog post Monday, noting that Trump in early November started privately talking about a potential deal with China to defuse trade tensions.