Trade war is put on hold
U.S. backs off on tariffs for Chinese goods in hopes of boosting trade
WASHINGTON — The Trump administration stepped back Sunday from a looming trade war with China, saying that it would refrain for now from applying major tariffs on Chinese goods in the wake of Beijing’s promise to ramp up purchases of U.S. products to reduce the trade deficit.
“We’re putting the trade war on hold,” Treasury Secretary Steven Mnuchin said on “Fox News Sunday.”
He noted that the United States and China, the world’s two biggest economies, had made“meaningful progress” in two days of high-level talks last week.
“We have agreed to put the tariffs on hold while we try to execute the framework,” Mnuchin added.
Mnuchin’s comments appeared to signal a more cooperative path for U.S. trade dealings with China. They are the latest indication that the two sides are trying to ease escalating tensions, and to forestall massive tariffs and counter-tariffs that Washington and Beijing have threatened against each other.
The downshift comes as President Donald Trump has reached out to Chinese President Xi Jinping for greater support in his efforts to persuade North Korean ruler Kim Jong Un to give up his nuclear arsenal. Trump is scheduled to meet with Kim on June 12 in Singapore.
Analysts expressed doubts that China’s commitment to “significantly increase purchases” of U.S. agriculture and other goods would make a meaningful dent in the trade deficit. They also warned that the more cooperative tone may not last long, especially as Trump has given conflicting signals and orders involving China trade and relations.
“While there will be periodic ceasefires, U.S.-Chinese trade relations will remain tense, with more barriers to trade and investments,” said David Loevinger, a former senior Treasury Department official for Mnuchin
China affairs.
Mnuchin acknowledged as much, noting that Trump “can always decide to put the tariffs back on if China doesn’t go through with their commitments.”
Trump had threatened to slap tariffs on $150 billion of Chinese goods, with the first $50 billion outlined in detail and ready to take effect soon. China had vowed to retaliate with its own tariffs on U.S. goods and services.
Mnuchin’s positive forecast came days after Trump unexpectedly pledged to help the Chinese telecom-equipment company ZTE survive crippling penalties for violating U.S. sanctions. “Too many jobs in China lost,” he tweeted.
Beijing offered its own conciliatory gestures by dropping an anti-dumping probe into imported U.S. sorghum and unblocking an American firm’s bid to buy a Toshiba business unit.
The easing of tensions, at least for now, was welcomed by investors and other governments who fear a U.S.-China trade war could ricochet into economies around the globe.
In a joint U.S.-Chinese statement Saturday, Beijing agreed to “substantially re- duce” the U.S. trade deficit with China.
The statement said China would expand its purchases of American farm and energy exports. The statement did not say how much China would buy, or how much of the trade deficit Beijing would aim to reduce.
Trump and supporters of a hard-line approach to China have repeatedly cited the large trade deficit as a key measure of the imbalance between the two nations. Last year the U.S. exported $130 billion of Chinese merchandise while it imported $506 billion worth of goods made in China.
The Trump administration had proposed a cut in the deficit of $200 billion or more, and on Friday, Larry Kudlow, Trump’s director of the National Economic Council, had indicated that Beijing had agreed to pare down its trade surplus by “at least $200 billion.”
On Sunday, Kudlow backed away from that figure, saying that “maybe I got ahead of the curve.”
Mnuchin said the administration would send Commerce Secretary Wilbur Ross to Beijing to work out details.
“We expect to see a very big increase, 35 to 45 percent increases in agriculture this year alone,” Mnuchin said.