There has been significant movement in negotiations between China and the United States on a new trade agreement. Both sides agreed not to impose new tariffs on one another while China pledged to purchase more U.S. goods.
“We’re putting the trade war on hold,” U.S. Treasury Secretary Steven Mnuchin told “Fox News Sunday.” “We have agreed to put the tariffs on hold while we try to execute the framework.”
The remarks echoed those by China Vice Premier Liu He, the top economic adviser to Chinese President Xi Jinping. He said the two sides have pledged not to engage in a trade war, according to state-run news agency Xinhua.
Mnuchin said the countries have agreed on a trade framework — though there aren’t many details. The joint announcement released Saturday did not put a dollar amount on China’s commitment to increase purchases.
The pledge for more cooperation comes as the US and China, the world’s two largest economies, have threatened tens of billions of dollars in tariffs that could lead to a trade war.
Both sides specifically agreed to “meaningful increases” in US agriculture and energy exports, according to the statement. The US intends to send a team to China to hammer out the details. Mnuchin said Sunday on Fox News that Trump can “put the tariffs back on” if China doesn’t follow through with its commitments.
This is more of a cease-fire than a peace treaty, but it does pull both sides back from the brink, if only temporarily.
“There’s no agreement for a deal,” [Trump economic advisor Larry] Kudlow told ABC. “We never anticipated one. There’s a communique between the two great countries, that’s all. And in that communique, you can see where we’re going next.”
One next step will be dispatching Commerce Secretary Wilbur Ross to China to look at areas where there will be significant increases, including energy, liquefied natural gas, agriculture and manufacturing, Mnuchin and Kudlow said.
Mnuchin said the United States expects to see a big increase of between 35 percent and 40 percent in agricultural exports to China this year alone and a doubling of energy purchases over the next three to five years.
“We have specific targets. I am not going to publicly disclose what they are. They go industry by industry,” Mnuchin said.
The administration was originally looking for a $200 billion increase in Chinese purchases of U.S. goods but that’s not going to happen. Instead, what the U.S. is likely to get are structural changes to the way China allows foreigners to do business — specifically, foreign ownership of Chinese businesses:
One provision on the table is revising the rules for American ownership of Chinese firms in sectors such as financial services. A proposed measure would bring the cap on ownership of a company from 45 percent now to 55 percent in three years and 100 percent at a point in the future, the official said.
U.S. companies have complained for years about these rules and easing them would be a big plus.
Dropping the new tariffs in exchange for vague promises from China to buy more U.S. products is probably the best we can do at this point. But if there is little progress to reach a deal the next few months, the U.S. will ratchet up the pressure on China again.