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Trade war fears ebb as US, China continue to work on wider trade agreement

China's government praised the cooling of trade tensions with the United States, saying agreement was in both nations' interests

Ben Blanchard Michael Martina & Susan Heavey | Reuters  |  BEIJING/WASHINGTON 

US, China, US China flag

and both claimed victory on Monday as the world's two largest economies stepped back from the brink of a global trade war and agreed to hold further talks to boost US exports to

Over the weekend, the two sides pledged to keep talking about how could import more and agricultural commodities from the so as to narrow the Rs 335 billion annual US goods and services trade deficit with China, although details and a firm timeline were thin.

The biggest immediate beneficiary appeared to be China, which won a reprieve from threatened tariffs on Rs 50 billion of its exports to the as well as a lifeline for , a major company whose existence had been threatened by US  sanctions.

The meanwhile appeared to have won promises of more imports by China, although there were no specifics.

Economists at estimated exports of US agricultural products, primarily beef, and energy, mostly liquified natural gas, could add between Rs 60 billion and Rs 90 billion to sales to over a period of years. That is far less than the Rs 200 billion reduction in China's trade surplus that had demanded at the start of talks.

"China has agreed to buy massive amounts of ADDITIONAL Farm/- would be one of the best things to happen to our farmers in many years!" Trump wrote on on Monday.

China's government praised the cooling of trade tensions with the United States, saying agreement was in both nations' interests while trumpeted what it saw as Beijing's refusal to surrender to US economic threats.

There were, however, more questions for the Trump administration, which stands accused by critics of selling out on plans to stop the theft of US companies' trade secrets in exchange for a quick deal to reduce the US trade deficit.

Questions also remained over the administration's handling of ZTE, a Chinese company that had been sanctioned by and effectively put out of business, but whose fate was made a precondition of last week's trade talks in a conversation between Trump and

Trump agreed to allow ZTE to stay in business and the United States and China struck a deal to drop their tariff threats while they worked on a wider trade agreement, US Treasury said on Sunday.

had threatened to impose tariffs on Rs 50 billion of Chinese imports unless rectified its theft of US intellectual property. After China responded with its own tariffs on US agriculture, Trump threatened to impose duties on an additional Rs 100 billion of Chinese goods, a move that hit global stock markets hard due to fears of rising protectionism.

US Commerce will travel to China next week to help finalize a trade agreement, Mnuchin said on Monday. Most observers say a firm deal is likely to take a long time.

In an interview earlier with CNBC, Mnuchin characterized the US tariff plan as suspended, but warned that "the can always put tariffs back on."

Speaking at a daily briefing, Chinese said both countries had clearly recognised that the reaching of a consensus was good for all.

"China has never hoped for any tensions between China and the United States, in the trade or other arenas," Lu said.

But Chinese media was also quick to point out how the country had successfully defended its interests.

Mei Xinyu, a commerce ministry researcher, wrote on the WeChat account of the overseas edition of the ruling Communist Party's official People's Daily that the agreement preserved China's right to develop its economy as it sees fit, including moving up the value chain.

The deal also focused on China's "positive position" to increase imports rather than a "negative position" of getting it to cut exports, Mei said.



The said everyone could heave a sigh of relief at the ratcheting down of the rhetoric, and cited China's chief negotiator, Liu He, as saying the talks had proved to be "positive, pragmatic, constructive and productive".

"Despite all the pressure, China didn't 'fold', as US President observed. Instead, it stood firm and continually expressed its willingness to talk," the English-language newspaper said in an editorial.

During an initial round of talks this month in Beijing, the United States demanded that China reduce its trade surplus by Rs 200 billion. No dollar figure was cited in the countries' joint statement on Saturday.

Some in US business groups who had been pushing for tougher measures to pressure China to ease long-standing market barriers on US companies expressed disappointment.

James Zimmerman, a Beijing-based and a former of the American Chamber of Commerce in China, said the Trump administration's move to walk back its threatened trade actions was premature, and a "lost opportunity" for American companies, workers and consumers.

"The Chinese are in a state of quiet glee knowing that Trump's trade team backed off on sanctions without getting any real and meaningful concessions out of Beijing," Zimmerman said.

But Jacob Parker, of China operations at the US-China Business Council, called the apparent de-escalation in trade tensions "a great bit of progress".

"We were never supportive of tariffs, so any actions that can be taken to stop those from being implemented are positive from our view," Parker told



Stocks with major exposure to China such as and gained on of a softening in the trade rhetoric of recent weeks. The dollar also gained against a basket of currencies.

noted the lack of specifics in statements by US and Chinese officials, which it viewed mainly as evidence that both sides wanted to continue talking.

"We do not rule out the possibility that the Chinese team offered some tangible concessions which helped the progress of the talks, but as other aspects of an agreement are still in flux, has avoided stating these offers in public," wrote in a research note.

Some analysts in warned that trade tensions would persist, and that China should prepare for more action on trade from the

"We should not be blindly optimistic," Shi Yinhong, an expert on China-US relations at Renmin University, said at a forum on Sunday after the trade agreement was announced.

"Blind optimism (could lead to) China losing at this crossroads."

Shi, who has advised the government on diplomatic issues, said China could accept a lower trade surplus and reduce its market entry barriers, but would not compromise on its industrial policy.

The People's Daily said that in the and agriculture sectors the two countries had obvious synergies, with the United States having the capacity to satisfy the massive Chinese market.

"The ballast stone of Sino-US ties are an equal and mutually beneficial trade and business relationship. Its essence is win-win cooperation," it said.

But China was not being forced to increase imports as a way to ward off the trade tensions or because the country had submitted to outside pressure, the newspaper said.


First Published: Tue, May 22 2018. 06:49 IST