CHINA GETS US TAR­IFF DE­LAY BUT MOVE­MENT ON TECH UN­CLEAR

Apple Magazine - - Summary -

Buy more U.S. ex­ports? Done. Tin­ker with tech­nol­ogy tac­tics that irk Wash­ing­ton and other trad­ing part­ners? Maybe. But scrap those plans, seen by Bei­jing as a path to pros­per­ity and in­flu­ence? Prob­a­bly never.

The agree­ment by Pres­i­dent Don­ald Trump and his Chi­nese coun­ter­part Xi Jin­ping on a cease fire on tar­iffs post­pones the threat of more dis­rup­tion for China’s ex­porters and their Asian sup­pli­ers. Some economists said Xi might be ready to ne­go­ti­ate in earnest.

Still, Bei­jing gave no sign of a changed stance on tech­nol­ogy am­bi­tions that Wash­ing­ton says vi­o­late Chi­nese mar­ket-open­ing obli­ga­tions and might threaten U.S. in­dus­trial lead­er­ship.

Trump’s com­plaints strike at the heart of the rul­ing Com­mu­nist Party’s state-led eco­nomic model and plans to re­store China to its right­ful place as a po­lit­i­cal and cul­ture leader 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 his week­end meet­ing with Xi in Ar­gentina, Trump agreed to post­pone planned U.S. tar­iff hikes on Chi­nese im­ports by 90 days while the two sides ne­go­ti­ate. The 90-day clock starts Jan­uary 1. Xi re­vived prom­ises to nar­row China’s multi­bil­lion-dol­lar trade sur­plus with the United States by pur­chas­ing more Amer­i­can ex­ports. The out­come was “as good as we could have ex­pected,” the chair­man of the Amer­i­can Cham­ber of Com­merce in China, William Zarit, said in a state­ment. Trump said on Twit­ter that Bei­jing agreed to cut im­port du­ties on U.S. au­tos. There was no Chi­nese con­fir­ma­tion of the move, which would have lit­tle im­pact on trade be­cause most Amer­i­can ve­hi­cles sold in China are made here. Trea­sury Sec­re­tary Steven Mnuchin told re­porters at the White House that there was an “an im­me­di­ate fo­cus on re­duc­ing auto tar­iffs,” though he did not pro­vide de­tails or tim­ing. Asked if there was a spe­cific agree­ment to re­move the tar­iffs, he said: “Yes, there was.”

Yet Larry Kud­low, the top White House eco­nomic ad­viser, said that “We don’t yet have a spe­cific agree­ment on that,” re­fer­ring to the auto tar­iffs.

“But I will just tell you as an in­volved par­tic­i­pant we ex­pect those tar­iffs to go to zero,” Kud­low added in a con­fer­ence call with re­porters.

Mnuchin stressed that the two lead­ers had de­tailed conv er­sa­tions on 142 items and said the goal now was to turn the talks into a “real agree­ment.” He said both lead­ers had ex­tended in­vi­ta­tions to visit their re­spec­tive coun­tries and said he ex­pects them to meet in the “near fu­ture.”

In­vestors were pleased by the news. The Dow Jones in­dus­trial av­er­age surged 320 points in later af­ter­noon trad­ing.

Trump’s prom­ise gives Xi po­lit­i­cal room to ne­go­ti­ate af­ter Bei­jing said ear­lier talks were im­pos­si­ble while Wash­ing­ton “holds a knife” of tar­iff threats to China’s throat. But both lead­ers face a mix of eco­nomic na­tion­al­ists, free trade ad­vo­cates and other con­flict­ing forces at home.

The out­come wasn’t the re­sult of a “sig­nif­i­cant change” by China, Louis Kuijs of Ox­ford Eco­nomics said in a re­port. Wash­ing­ton in­stead chose to see Bei­jing’s ar­gu­ment that it al­ready is mak­ing changes “in a more pos­i­tive light.”

One sign of how far apart the two sides are: China’s for­eign min­is­ter an­nounced in Buenos Aires that Trump agreed to stop rais­ing tar­iffs, rather than that he promised a 90day sus­pen­sion. Wang Yi failed to men­tion in­dus­trial pol­icy or Trump’s de­mand that Bei­jing make progress to­ward chang­ing it or face re­newed in­creases.

Those omis­sions sug­gest Bei­jing doesn’t rec­og­nize how im­por­tant those de­mands are to Trump, said Nick Marro of the Econ­o­mist In­tel­li­gence Unit.

“As a re­sult we ex­pect trade hos­til­i­ties to re­sume in 2019,” Marro said in a re­port.

Trump im­posed a tar­iff hike of 25 per­cent on $50 bil­lion of Chi­nese im­ports in July over com­plaints Bei­jing steals or pres­sures com­pa­nies to hand over tech­nol­ogy. Trump hit an ad­di­tional $200 bil­lion of Chi­nese goods with a 10 per­cent tar­iff that had been due to rise to 25 per­cent on Jan. 1.

China re­tal­i­ated by rais­ing its own charges on U.S. im­ports.

Bei­jing has tried without suc­cess to re­cruit France, Ger­many, Japan and other gov­ern­ment as al­lies against Trump. They dis­like the Amer­i­can pres­i­dent’s tac­tics but echo U.S. com­plaints about mar­ket bar­ri­ers.

Xi’s gov­ern­ment has of­fered to al­ter de­tails but re­jects pres­sure to dis­card blue­prints such as “Made in China 2025,” which calls for cre­ation of cham­pi­ons in ar­ti­fi­cial in­tel­li­gence, elec­tric cars and other in­dus­tries.

Those are “cen­tral to Xi’s core agenda of mak­ing China an in­no­va­tion su­per­power” and linked to “geopo­lit­i­cal com­pe­ti­tion” with Wash­ing­ton, said Michael Hir­son, Jef­frey Wright and Paul Tri­olo of Eura­sia Group in a re­port.

Still, Kuijs said Chi­nese lead­ers might have hinted to the Amer­i­cans of pos­si­ble con­ces­sions.

China has its own griev­ances. Bei­jing is un­happy with U.S. lim­its on ex­ports of “dual use” tech­nol­ogy with pos­si­ble mil­i­tary ap­pli­ca­tions.

Xi’s gov­ern­ment com­plains Chi­nese com­pa­nies are treated un­fairly in Amer­i­can se­cu­rity re­views of pro­posed cor­po­rate ac­qui­si­tions, even though nearly all deals are ap­proved un­changed.

“China hopes the United States will treat Chi­nese com­pa­nies equally,” said Song Li­fan, an econ­o­mist at Ren­min Uni­ver­sity in Bei­jing.

Cui put the odds of an agree­ment at “higher than 50 per­cent” but said he had no idea how long that might take.

The tar­iffs bat­tle has over­shad­owed changes Xi’s gov­ern­ment has an­nounced this year.

While Bei­jing re­tal­i­ated for U.S. tar­iff hikes by im­pos­ing penalty charges on Amer­i­can soy­beans, au­tos and other goods, it cut du­ties on fac­tory ma­chin­ery and other im­ports from other coun­tries.

The gov­ern­ment also has promised to ease lim­its on for­eign own­er­ship of au­tomak­ers, in­sur­ance ven­tures and other com­pa­nies.

Busi­ness groups have wel­comed those changes but say they don’t ad­dress more im­por­tant com­plaints about a thicket of rules lim­it­ing ac­cess to China’s fi­nance, lo­gis­tics and other in­dus­tries.

Com­pa­nies want a gen­uine re­sponse with mea­sur­able goals, said Ken­neth Jar­rett, the pres­i­dent of the Amer­i­can Cham­ber of Com­merce in Shang­hai, in an email.

A mea­sure of progress will be whether Bei­jing of­fers “mean­ing­ful con­ces­sions” on tech­nol­ogy, said Hir­son, Wright and Tri­olo of Eura­sia Group.

Without that, hard­lin­ers in Wash­ing­ton “will urge Trump to re­sume es­ca­la­tion,” they said.

Im­age: Pablo Martinez Mon­si­vais

Im­age: Pablo Martinez Mon­si­vais

Im­age: Li Xueren

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