U.S. and China Make Successful Start on New Trade Negotiations

COMMENTARY Asia

U.S. and China Make Successful Start on New Trade Negotiations

Dec 3rd, 2018 3 min read
COMMENTARY BY
Riley Walters

Policy Analyst, Asia Economy and Technology

Riley Walters is policy analyst, Asia Economy and Technology in The Heritage Foundation’s Asian Studies Center.
Chinese President Xi Jinping (R) meets with his U.S. counterpart Donald Trump in Buenos Aires, Argentina, Dec. 1, 2018. Xinhua/Sipa USA/Newscom

President Donald Trump and Chinese President Xi Jinping made progress Saturday night toward resolving the ongoing U.S.-China trade dispute.

After more than a year of conflict and new taxes on billions of cross-border trade, the two presidents came to an agreement at the G20 summit in Buenos Aires, Argentina, that could begin de-escalating U.S.-China trade tensions through new negotiations.

According to Trump, “It’s an incredible deal. It goes down, certainly—if it happens, it goes down as one of the largest deals ever made. It’s a deal between the United States and China made by the president and the president.”

It was a pivotal meeting between the two countries’ leaders that could have gone very differently and allowed bilateral trade issues to worsen in 2019. Instead, the two sides agreed to a process that will begin to address many of the outstanding tariffs, non-tariff barriers, and importantly, intellectual property complaints the U.S. has against China.

For 90 days, starting Jan. 1., representatives from both the U.S. and China will seek changes to trade and investment practices. And while there are few details about the structure of the negotiations themselves, there are some important takeaways already.

First, the Trump administration has applied tariffs on over $250 billion worth of Chinese imports. Of those imports, $200 billion were subject to an additional tariff of 10 percent since late September, and the 10 percent was scheduled to increase to 25 percent on Jan. 1, 2019.

The president has delayed his decision to increase these tariffs to 25 percent until the end of the 90-day negotiations, pending progress on the issues at hand.

Second, China will begin purchasing more American-made products—including agricultural, energy, and industrial goods—as a way to reduce the bilateral trade deficit the U.S. has with China. And it will begin purchasing the agricultural products immediately.

And third, according to Trump, China has already agreed to reduce the tariffs it has on American auto imports—many of which were put in place as retaliation against U.S. tariffs. Chinese tariffs on auto imports are currently 40 percent for the U.S., compared to just 15 percent for other countries.

There are still a number of unanswered questions that remain, such as what else Xi initially offered, how much will China begin purchasing from U.S. businesses, whether Trump offered anything other than a freeze on new tariffs, who will lead the negotiations, how often will they meet, and what a final deal could actually look like. More details will likely emerge throughout the week.

Already, White House trade adviser Peter Navarro mentioned that it will be U.S. Trade Representative Robert Lighthizer who will lead the U.S. team, and that the discussions will mostly focus on intellectual property theft, forced technology transfer, and China’s state-directed acquisition of U.S. technology. Treasury Secretary Steven Mnuchin went as far to say even currency will be an issue covered during negotiations.

However, the negotiations going forward won’t be easy. Already there’s been reporting on the differences in statements given by the U.S. and China from the meeting. Chinese statements made no reference to the 90 days for negotiations nor purchasing of U.S. agricultural products.

Liu He, Chinese vice-premier and Xi’s economic adviser, may provide some clarification if he visits Washington, D.C., sometime in December as a part of the negotiations.

Nonetheless, the outcome of this weekend’s summit was a success. Ninety days is not enough time for major reform of the Chinese economic model, but it’s a necessary start in making changes that address specific American concerns and avert more punitive tariffs.

This piece has been changed to reflect the 90 days begins Jan. 1. 

This piece originally appeared in The Daily Signal