China relents on tariffs, draws Trump’s praise
President Xi reiterates vows for reforms for foreign firms, draws Trump’s praise
Chinese President Xi Jinping promised Tuesday to open the country ’s economy further and lower import tariffs on products like cars, in a speech seen as an attempt to defuse an escalating trade dispute with the United States.
While many of his pledges were reiterations of previously announced reforms that foreign businesses say are long overdue, Xi’s comments sent stock markets and the U.S. dollar higher on hopes of a compromise that could avert a trade war.
Xi said China will widen market access for foreign investors, addressing a chief complaint of its trading partners and a point of contention for U.S. President Donald Trump’s administration, which has threatened billions of dollars in tariffs on Chinese goods.
Trump struck a conciliatory tone in response to Xi’s speech, saying on Twitter that he was “thankful” for the Chinese leader’s kind words on tariffs and access for U.S. automakers, as well as his “enlightenment” on intellectual property.
“We will make great progress together!” Trump tweeted.
Washington charges that Chinese companies steal the trade secrets of American companies and force them into joint ventures to get hold of their technology, an issue at the centre of Trump’s current tariff threats.
The latest comments from both leaders appear to reinforce a view that a full-scale trade war can be averted, although there have been no talks between the world’s two economic superpowers since the U.S. tariffs were announced.
“President Xi’s speech appears to have struck a relatively positive tone and opens the door to potential negotiations with the U.S. in our view. The focus now shifts to the possible U.S. response,” economists at Nomura said. “But of course actions speak louder than words.”
The speech at the Boao Forum for Asia had been widely anticipated as one of Xi’s first major addresses in a year in which the ruling Communist party marks the 40th anniversary of its landmark economic reforms and opening up under former leader Deng Xiaoping.
Xi said China would raise the foreign ownership limit in the automobile, shipbuilding and aircraft sectors “as soon as possible” and push previously announced measures to open the financial sector.
“This year, we will considerably reduce auto import tariffs, and at the same time reduce import tariffs on some other products,” Xi said.
He said “Cold War mentality” and arrogance had become obsolete and would be repudiated. His speech did not specifically mention the United States or its trade policies, which have been assailed by Chinese state media in recent days.
Chinese officials have promised since at least 2013 to ease restrictions on foreign joint ventures in the auto industry, which would allow foreign firms to take a majority stake. They currently are limited to a 50-per-cent stake in joint ventures and cannot establish their own wholly owned factories.
Xi’s renewed pledges to open up the auto sector come after Trump on Monday criticized China on Twitter for maintaining 25-per-cent auto import tariffs compared to the United States’ 2.5-per-cent duties, calling such a relationship with China not free trade but “stupid trade.”
Analysts have cautioned that any Chinese concessions on autos, while welcome, would be a relatively easy win for China to offer the United States, as plans for opening that sector had been under way well before Trump took office.
Trump’s move last week to threaten China with tariffs on US$50 billion in Chinese goods was aimed at forcing Beijing to address what Washington says is deeply entrenched theft of U.S. intellectual property and forced technology transfers from U.S. firms.
Chinese officials deny such charges, and responded within hours of Trump’s announcement of tariffs with their own proposed commensurate duties.
The move prompted Trump last week to threaten tariffs on an additional US$100 billion in Chinese goods, which have yet to be identified. None of the announced duties have been implemented yet, offering room for negotiation.
Beijing charges that Washington is the aggressor and spurring global protectionism, although China’s trading partners have complained for years that it abuses World Trade Organization rules and practices unfair industrial policies that lock foreign firms out of crucial sectors with the intent of creating domestic champions.