Trade war fears ebb as US, China agree to continue talks

BEIJING/WASHINGTON (Reuters) – Washington and Beijing both claimed victory on Monday as the world’s two largest economies stepped back from the brink of a global trade war and agreed to hold further talks to boost US exports to China.

Over the weekend, the two sides pledged to keep talking about how China could import more energy and agricultural commodities from the United States so as to narrow the $335 billion annual US goods and services trade deficit with China, although details and a firm timeline were thin.

The biggest immediate beneficiary appeared to be China, which won a reprieve from threatened tariffs on $50 billion of its exports to the United States as well as a lifeline for ZTE Corp, China’s second biggest telecom equipment maker whose existence had been threatened by US sanctions.

The US, meanwhile, appeared to have won promises of more imports by China, although there were no specifics.

Threatened US restrictions on Chinese investments in the US also appeared to be put on the back burner. The US Treasury said it met a legal obligation to report progress to President Donald Trump on the development of such restrictions, but it declined to provide details.

Treasury Secretary Steven Mnuchin “discussed options for the president’s consideration on the matter,” a Treasury spokeswoman said.

Emergency Economic Powers Act, used extensively after the 9/11 attacks in 2001, to limit Chinese investments in US technology companies.

Economists at Morgan Stanley estimated that exports of US agricultural products, primarily beef, and energy, mostly liquified natural gas, could add between $60 billion and $90 billion to sales to China over a period of years. That is far less than the $200 billion reduction in China’s trade surplus that Trump demanded at the start of talks.

China’s government praised the cooling of trade tensions with the US, saying agreement was in both nations’ interests, while state media trumpeted what it said was Beijing’s refusal to surrender to US economic threats.

There were, however, more questions for the Trump administration, which stands accused by critics of selling out on plans to stop the theft of US companies’ trade secrets in exchange for a quick deal to reduce the US trade deficit.

Questions also remained over the administration’s handling of ZTE. The Chinese company was sanctioned by Washington after it was caught illegally shipping goods to Iran and effectively put out of business, but its fate was made a precondition of last week’s trade talks in a conversation between Trump and President Xi Jinping.