Continued from previous pageTariffs on those products had been set to rise from 10 percent to 25 percent on Jan. 1.
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.”
If parties can’t reach an agreement at the end of 90 days from the date of Trump’s and Xi’s Saturday meeting (i.e., March 1), U.S. 10 percent tariffs on will rise to 25 percent, the White House statement says.
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.
Despite the fact that there are already World Trade Organization rules covering IP rights-related issues in the context of international commerce, the U.S. continues to use the bilateral path to resolve its concerns, which has led to a he-said-she-said dynamic in which, basically, the U.S. has accused China of several illicit practices that China has denied, Lester said in an interview with American Shipper.
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.
The Trump administration is seeking to induce China to abandon much of its system, but Beijing isn’t likely to leave an industrial policy that has resulted in more than 30 years of rapid growth and is woven into its political system, Kent Hughes, public policy fellow at the nonpartisan Wilson Center, wrote in an email.
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.”
The Chinese statement notes that the China side said during the G20 meeting that it will work to open its market, expand imports and “resolve economy- and trade-related issues in China-U.S. relations,” but did not mention any specific U.S. sectors it would seek to increase purchases from. While the Trump-Xi agreement delayed tariffs, it didn’t break new ground, Hughes said.
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.
The U.S. agricultural industry, particularly the soybean sector, has been hit hard during the trade war, as China was previously the top export destination for U.S. soybeans. According to Bloomberg data, China imported 80 percent less soybeans from the U.S. in September compared with a year earlier, while imports from Brazil increased 28 percent.
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.
“That the deal was largely set in advance matters because, based on what’s been made public, very little was achieved since,” he wrote. “America and China have 90 days to resolve fundamental issues before tariffs jump, versus the 30 they had before the weekend. The U.S. [Section 301] investigation which led to those tariffs began in August 2017. If the 15 months since then didn’t do the trick, why will an extra two?”