Trump, Xi reach truce on tar­iffs at G-20

China agrees to buy more U.S. goods to lower trade deficit

Houston Chronicle Sunday - - NATION | WORLD - By Paul Wise­man, Zeke Miller and Cather­ine Lucey

BUENOS AIRES, Ar­gentina — The United States and China reached a 90-day cease­fire in a trade dis­pute that has rat­tled fi­nan­cial mar­kets and threat­ened world eco­nomic growth. The break­through came af­ter a din­ner meet­ing Sat­ur­day be­tween Pres­i­dent Don­ald Trump and Chi­nese leader Xi Jin­ping at the Group of 20 sum­mit in Buenos Aires.

Trump agreed to hold off on plans to raise tar­iffs Jan. 1 on $200 bil­lion in Chi­nese goods. The Chi­nese agreed to buy a “not yet agreed upon, but very sub­stan­tial amount of agri­cul­tural, en­ergy, in­dus­trial” and other prod­ucts from the United States to re­duce Amer­ica’s huge trade deficit with China, the White House said.

The truce, reached af­ter a din­ner of more than two hours, buys time for the two coun­tries to work out their dif­fer­ences in a dis­pute over Bei­jing’s ag­gres­sive drive to sup­plant U.S. tech­no­log­i­cal dom­i­nance.

“It’s an in­cred­i­ble deal,” Trump told re­porters aboard Air Force One. “What I’ll be do­ing is hold­ing back on tar­iffs. China will be open­ing up, China will be get­ting rid of tar­iffs. China will be buy­ing mas­sive amounts of prod­ucts from us.”

In an­other long-sought con­ces­sion to the U.S., China agreed to la­bel fen­tanyl, the deadly syn­thetic opi­oid re­spon­si­ble for tens of thou­sands of Amer­i­can drug deaths an­nu­ally, as a con­trolled sub­stance. And Bei­jing agreed to re­con­sider a takeover by U.S. chip­maker Qual­comm that it had pre­vi­ously blocked.

The White House an­nounce­ment framed a vic­tory for Trump and his un­flinch­ing ne­go­ti­at­ing tac­tics, se­cur­ing a com­mit­ment from China to en­gage in talks on key U.S. eco­nomic pri­or­i­ties, with lit­tle ob­vi­ous con­ces­sion by the U.S. No­tably, how­ever, the White House ap­pears to be re­vers­ing course on its pre­vi­ous threats to tie trade dis­cus­sions to se­cu­rity con­cerns, like China’s at­tempted ter­ri­to­rial ex­pan­sion in the South China Sea.

Locked in dis­pute

“It’s great the two sides took ad­van­tage of this op­por­tu­nity to call a truce,” said Andy Roth­man, in­vest­ment strate­gist at Matthews Asia. “The two sides ap­pear to have had a ma­jor change of heart to move away from con­fronta­tion to­ward en­gage­ment. This changes the tone and di­rec­tion of the bi­lat­eral con­ver­sa­tion.”

The Trump-Xi meet­ing was the mar­quee event of Trump’s whirl­wind two-day trip to Ar­gentina for the G-20 sum­mit af­ter the pres­i­dent can­celed a sit-down with Rus­sian Pres­i­dent Vladimir Putin over mount­ing ten­sions be­tween Rus­sia and Ukraine. Trump also can­celed a Sat­ur­day news con­fer­ence, cit­ing re­spect for the Bush fam­ily fol­low­ing the death of for­mer Pres­i­dent Ge­orge H.W. Bush.

The United States and China are locked in a dis­pute over their trade im­bal­ance and Bei­jing’s tech poli­cies. Wash­ing­ton ac­cuses China of de­ploy­ing preda­tory tac­tics in its tech drive, in­clud­ing steal­ing trade se­crets and forc­ing Amer­i­can firms to hand over tech­nol­ogy in ex­change for ac­cess to the Chi­nese mar­ket.

Trump has im­posed im­port taxes on $250 bil­lion in Chi­nese prod­ucts — 25 per­cent on $50 bil­lion worth and 10 per­cent on the other $200 bil­lion. Trump had planned to raise the tar­iffs on the $200 bil­lion to 25 per­cent if he couldn’t get a deal with Xi.

Deal on fen­tanyl

China has al­ready slapped tar­iffs on $110 bil­lion in U.S. goods.

Un­der the agree­ment reached in Buenos Aires, the two coun­tries have 90 days to re­solve their dif­fer­ences over Bei­jing’s tech poli­cies. If they can’t, the higher U.S. tar­iffs will go into ef­fect on the $200 bil­lion in Chi­nese im­ports.

U.S. of­fi­cials in­sist that the Amer­i­can econ­omy is more re­silient to the tu­mult than China’s, but they re­main anx­ious of the eco­nomic ef­fects of a pro­longed show­down — as Trump has made eco­nomic growth the bench­mark by which he wants his ad­min­is­tra­tion judged.

A full-blown res­o­lu­tion was not ex­pected to be reached in Buenos Aires; the is­sues that di­vide them are just too dif­fi­cult.

Grow­ing con­cerns that the trade war will in­creas­ingly hurt cor­po­rate earn­ings and the U.S. econ­omy are a key rea­son why U.S. stock prices have been sink­ing this fall.

Join­ing other fore­cast­ers, econ­o­mists at the Or­ga­ni­za­tion for Eco­nomic Co-op­er­a­tion and Devel­op­ment last week down­graded their out­look for global eco­nomic growth next year to 3.5 per­cent from a pre­vi­ous 3.7 per­cent. They cited the trade con­flict as well as po­lit­i­cal un­cer­tainty.

The U.S. and China also made progress on the reg­u­la­tion of fen­tanyl, which is 50 times more pow­er­ful than heroin. U.S. of­fi­cials for years have been press­ing the Chi­nese gov­ern­ment to take a tougher stance against fen­tanyl, and most U.S. sup­ply of the drug is man­u­fac­tured in China.

White House press sec­re­tary Sarah Sanders says China’s de­ci­sion to la­bel the drug as a con­trolled sub­stance means that “peo­ple sell­ing Fen­tanyl to the United States will be sub­ject to China’s max­i­mum penalty un­der the law.”

The White House also said that China’s gov­ern­ment is “open to ap­prov­ing” the pur­chase of Dutch semi­con­duc­tor man­u­fac­turer NXP by Amer­i­can chip­maker Qual­comm.

China nixed the pro­posed takeover ear­lier this year, cit­ing an­titrust con­cerns, af­ter U.S. and Euro­pean reg­u­la­tors ap­proved it.

Qual­comm dropped the deal af­ter it failed to re­ceive Chi­nese gov­ern­ment ap­proval. It is un­clear whether the trans­ac­tion could be re­vived.

Pablo Martinez Mon­si­vais / As­so­ci­ated Press

Pres­i­dent Don­ald Trump dines with with China’s Pres­i­dent Xi Jin­ping, far left, dur­ing their bi­lat­eral meet­ing at the G-20 Sum­mit on Sat­ur­day in Buenos Aires, Ar­gentina.

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