Trump and Xi agreement buys time in trade war
The two leaders have agreed to an additional 90 days to resolve their issues, including Chinese moves to dominate the technology sector.
The dinner table diplomacy between US president Donald Trump and his Chinese counterpart Xi Jinping over the weekend has produced something as vague as it is valuable: an agreement to keep talking.
Forged over grilled sirloin at the Group of 20 summit in Buenos Aires, Argentina, the economic ceasefire Mr Trump and Mr Xi agreed to illustrated that the leaders of the world’s two largest economies can at least find some common ground.
The truce pulled the United States and China back from an escalating trade war that was threatening world economic growth and had set global investors on edge.
China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.— Donald J. Trump (@realDonaldTrump) December 3, 2018
What Mr Trump and Mr Xi achieved was the gift of additional time – 90 days, at least – to try to resolve the complicated issues that divide them.
Most important among them, and perhaps the most intractable, is the US argument that Beijing has deployed predatory tactics in a bid to overtake America’s global supremacy in high technology.
The Trump administration asserts, and many experts agree, that China systematically steals trade secrets and forces the US and other countries to hand over sensitive technology as the price of admission to the vast Chinese market.
Washington also regards Beijing’s ambitious long-term development plan, entitled “Made in China 2025”, as a scheme to dominate such fields as robotics and electric vehicles by unfairly subsidising Chinese companies and discriminating against foreign competitors.
This year, Mr Trump imposed an import tax of 25% on 50 billion dollars (£39 billion) in products, then hit an additional 200 billion dollars’ (£156 billion) worth of goods with 10% tariffs. Those 10% tariffs were scheduled to ratchet up to 25% on January 1 if the US and China failed to reach an agreement to at least postpone that move.
In Buenos Aires, they did reach such an accord. Mr Trump has agreed to delay the scheduled US tariff increase for 90 days while the two sides negotiate over the administration’s technology-related complaints.
In return, China agreed to buy what the White House called a “not yet agreed upon, but very substantial” amount of US products to help narrow America’s gaping trade deficit with China.
If China does eventually increase such purchases, it would be warmly welcomed in the US farm belt, where producers of soybeans and other crops have been hurt by Beijing’s retaliatory tariffs.
Mr Trump tweeted that “China has agreed to reduce and remove tariffs on cars coming into China from the US. Currently the tariff is 40%”.
There was no Chinese announcement about possible tariff cuts and the ministry of commerce in Beijing did not immediately respond to questions.
Beijing cut import duties on foreign cars to 15% in July but added a 25% penalty for US-made vehicles the following month in response to Mr Trump’s tariff hikes.
China’s contentious tech policies lie at the heart of its economic vision, and Beijing could prove reluctant to sacrifice its ambition, no matter what longer-term agreement with the US it eventually reaches.
The Buenos Aires breakthrough may calm investors who were worried about financial damage from the trade hostilities.
Caterpillar, Ford and other US corporate giants have complained that the higher Trump tariffs, if kept in place, would guarantee higher costs and lower profits.
That is one reason the Dow Jones Industrial Average tumbled this autumn after hitting a record close October 3.
However, just as Mr Trump dialled back the drama on one trade front over the weekend, he magnified the tension on another.
The president told reporters that he would soon notify US congress that he is abandoning the North American Free Trade Agreement (Nafta).
Such a move would force members of congress to approve the Nafta replacement he brokered on September 30 with Canada and Mexico – or have no North American trade bloc at all.
The absence of any such bloc would hurt companies that have built supply chains that cross the three countries’ borders.