U.S. Commerce Secretary, Chinese Vice Premier set for Sunday talks amid trade row

By Ben Blanchard and Michael Martina

BEIJING (Reuters) - U.S. Commerce Secretary Wilbur Ross is expected to meet Chinese Vice Premier Liu He on Sunday, a U.S. government official said, as officials from the world's two biggest economies try to calm an escalating trade spat that has rattled financial markets.

Ross arrived in Beijing on Saturday morning for trade talks with Chinese officials, after the Trump administration renewed its tariff threats against China, and with key U.S. allies in a foul mood towards Washington after they were hit with duties on steel and aluminium.

Liu is China's chief negotiator in the trade dispute.

Washington and Beijing have threatened tit-for-tat tariffs on goods worth up to $150 billion each.

But just when it appeared a trade truce between the two economic heavyweights was on the cards, the White House this week warned it would pursue tariffs on $50 billion worth of Chinese imports, as well as impose restrictions on Chinese investments in the United States and tighter export controls.

Ross, who was preceded in Beijing this week by more than 50 U.S. officials, is expected during the two-day visit to try and secure long-term purchases of U.S. farm and energy commodities to help shrink the U.S. trade deficit. The U.S. team also wants to secure greater intellectual property protections and an end to Chinese subsidies that have contributed to overproduction of steel and aluminium.

The purchases Washington wants Beijing to commit to are aimed at reducing the $375 billion U.S. trade deficit with China. Trump has demanded that China take steps to reduce the gap by $200 billion annually by 2020.

While many countries share U.S. frustration over Chinese trade and economic practices, critics of U.S. policy under President Donald Trump have warned that Washington risks alienating the European Union, Canada and Mexico with 25 percent tariffs on steel and 10 percent on aluminium.

On Friday, the United States' closest allies attacked the Trump administration for imposing tariffs on steel and aluminum imports, with Japan calling the U.S. actions' "deeply deplorable."

While U.S. officials have sent conflicting signals during the dispute with China, one person familiar with planning for Ross' visit said his aim was to keep a dialogue going.

Ross is "going there to tread water," the person said, declining to be identified due to the sensitivity of the matter.

"The more Trump is irritating allies and asking Chinese to buy stuff, the better off they are, because he's not sitting there and attacking the hard issues," the person said.

Those hard issues include what the U.S. complains is rampant theft of intellectual property, as well as Beijing's support for cutting-edge technologies under its Made in China 2025 policy.

QUALCOMM STILL IN QUESTION

On Friday, China's markets regulator said it was still reviewing San Diego-based Qualcomm Inc's $44 billion acquisition of NXP Semiconductors.

Some people familiar with the matter have told Reuters that approval may depend on progress of broader talks and a reprieve from a U.S. government ban on sales by U.S. companies to China's ZTE Corp, penalised for illegally supplying telecommunications gear to Iran and North Korea.

Reuters reported last Sunday that Qualcomm was expecting to meet this week in Beijing with China's antitrust regulators in a final push to secure clearance for the deal, but that meeting never materialized and the San Diego-based firm is now waiting to see the outcome of the Ross talks before officials travel to China, a person familiar with the matter said on Saturday.

China's exports have mushroomed since joining the World Trade Organisation in 2001, making it the world's second-largest economy. It has positioned itself as a defender of the global trade system in the face of Washington's tougher stance under Trump.

(Reporting by Ben Blanchard and Michael Martina in BEIJING; Additional reporting by Matthew Miller in BEIJING and David Lawder in WHISTLER, British Columbia; Writing by Brenda Goh in SHANGHAI; Editing by Shri Navaratnam)