White House hails China trade truce as skep­tics raise doubts

The Myanmar Times - - International Business -

THE Trump ad­min­is­tra­tion is cel­e­brat­ing the 90-day truce it reached in its trade war with China as a sig­nif­i­cant break­through de­spite scant de­tails, a hazy timetable and wide­spread skep­ti­cism that Bei­jing will yield to US de­mands any­time soon.

“This is just an enor­mous, enor­mous event,” Larry Kud­low, Pres­i­dent Don­ald Trump’s top eco­nomic ad­viser, said Mon­day of the cease-fire that Trump and Pres­i­dent Xi Jing­ping reached over the week­end on the side­lines of an in­ter­na­tional eco­nomic sum­mit in Buenos Aires, Ar­gentina. “This one cov­ers so much ground in some de­tail, we’ve never seen this be­fore.”

Yet many economists raised doubts that much had been — or would be — achieved within three months.

“The ac­tual amount of con­crete progress made at this meet­ing ap­pears to have been quite lim­ited,” Alec Phillips and other economists at Gold­man Sachs wrote in a re­search note.

Dur­ing the talks in Buenos Aires, Trump agreed to de­lay a sched­uled es­ca­la­tion in US tar­iffs on many Chi­nese goods, from 10 per­cent to 25pc, that had been set to take ef­fect Jan. 1. In­stead, the two sides are to ne­go­ti­ate over US com­plaints about China’s trade prac­tices, no­tably that it has used preda­tory tac­tics to try to achieve supremacy in tech­nol­ogy. These prac­tices, ac­cord­ing to the ad­min­is­tra­tion and out­side an­a­lysts, in­clude steal­ing in­tel­lec­tual prop­erty and forc­ing com­pa­nies to turn over tech­nol­ogy to gain ac­cess to China’s mar­ket.

In re­turn for the post­pone­ment in the higher US tar­iffs, China agreed to step up its pur­chases of US farm, en­ergy and in­dus­trial goods, the White House said.

Most economists noted that the two coun­tries re­main far apart on the big­gest ar­eas of dis­agree­ment, which in­clude Bei­jing’s sub­si­dies for strate­gic Chi­nese in­dus­tries, in ad­di­tion to forced tech­nol­ogy trans­fers and in­tel­lec­tual prop­erty theft.

“Ninety days is very lit­tle time to fix these peren­nial is­sues,” said Bill Adams, se­nior econ­o­mist at PNC.

Com­pli­cat­ing the chal­lenge, Trump’s com­plaints strike at the heart of the Com­mu­nist Party’s stateled eco­nomic model and its plans to el­e­vate China to po­lit­i­cal and cul­tural lead­er­ship by cre­at­ing global cham­pi­ons in ro­bot­ics and other fields.

“It’s im­pos­si­ble for China to can­cel its in­dus­try poli­cies or ma­jor in­dus­try and tech­nol­ogy devel­op­ment plans,” said econ­o­mist Cui Fan of the Univer­sity of In­ter­na­tional Busi­ness and Eco­nom­ics in Bei­jing.

At the same time, an­a­lysts said they were re­lieved that the Trump-Xi meet­ing at least pressed the “pause” but­ton on tar­iff hikes. Be­sides es­ca­lat­ing ex­ist­ing tar­iffs, Trump had threat­ened to im­pose im­port taxes on the re­main­ing $267 bil­lion of US goods from China. This would have raised prices in the United States on many con­sumer items, in­clud­ing smart­phones, clothes and toys.

Fears of a hot­ter trade war had sent fi­nan­cial mar­kets tum­bling in Oc­to­ber and Novem­ber. But they jumped Mon­day in re­sponse to Satur­day’s truce. The Dow Jones in­dus­trial av­er­age closed up 288 points, a gain of 1.1%.

Me­gan Greene, chief econ­o­mist at Man­ulife, said the mar­ket’s re­cent de­cline had likely con­tributed to Trump’s will­ing­ness to reach a truce.

“We are no longer in the same buoy­ant eco­nomic or mar­kets en­vi­ron­ment that we en­joyed ear­lier this year when threats of tar­iffs against China were first made,” she said.

In the mean­time, the out­lines of the agree­ment re­main hazy and in some cases con­fus­ing. Trump tweeted late Sun­day that China had agreed to “re­duce and re­move” its 40% tar­iff on cars im­ported from the U.S. Trea­sury Sec­re­tary Steven Mnuchin said Mon­day that there was a “spe­cific agree­ment” on the auto tar­iffs.

Yet Kud­low said later that there was no “spe­cific agree­ment” re­gard­ing auto trade, though he added, “We ex­pect those tar­iffs to go to zero.”

Shares of U.S. and over­seas auto com­pa­nies rose on the an­nounce­ment, though it’s un­clear how much com­pa­nies like GM or Ford will ac­tu­ally ben­e­fit. Nearly all the cars they sell in China are made there.

De­tails re­gard­ing China’s pledge to buy more Amer­i­can prod­ucts — one that it has made be­fore — re­main scant. Mnuchin said Mon­day morn­ing on CNBC that China had of­fered to buy up to $1.2 tril­lion of ad­di­tional U.S. goods, even while the “de­tails of that still need to be ne­go­ti­ated.”

But Kud­low said the ul­ti­mate amount will de­pend on mar­ket prices and the health of China’s econ­omy. “I would think of that as a broad goal,” he said. State-run Chi­nese me­dia has de­scribed the agree­ment very dif­fer­ently from how the Trump ad­min­is­tra­tion has. It has made no men­tion of any changes to its auto tar­iffs. And it has said noth­ing about a 90-day dead­line for the talks.

Greene said this might sim­ply re­flect China’s com­mu­ni­ca­tions strat­egy. Or it might il­lus­trate China’s weak com­mit­ment to the deal.

China agreed to elim­i­nate the re­tal­ia­tory tar­iffs it had placed on U.S. soy­beans, ac­cord­ing to the White House, which also said Bei­jing had agreed to buy an un­spec­i­fied but “very sub­stan­tial” amount of agri­cul­tural and other prod­ucts. That left some US farm­ers cau­tiously hope­ful Mon­day.

Photo: AP

White House chief eco­nomic ad­viser Larry Kud­low talks with re­porters about trade ne­go­ti­a­tions with China, at the White House on Mon­day.

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