World Economy

US, China Vow Not to Start Trade War

Both sides attach paramount importance to intellectual property protections and agree to strengthen cooperation
Liu He (L) and Steven Mnuchin after the joint statement to avoid a trade war.Liu He (L) and Steven Mnuchin after the joint statement to avoid a trade war.

With "minutes to midnight", the great US-China trade war appears to have been averted. Just ahead of the US deadline to impose a punitive new regime of tariffs, a deal of sorts has been struck with the Chinese agreeing to take measures to reduce its bilateral trade surplus, principally by buying more US goods.

US and China issued a joint statement on Saturday to conclude the trade talks with Chinese Vice Premier Liu He. There was no mentioning of any number, but the statement said there were “consensus on taking effective measures to substantially reduce” US trade deficit in goods with China. And, China agreed to “significantly increase purchase” of US goods and services, news outlets reported.

Additionally, there would be “meaningful increases” in US agriculture and energy exports to China, “expanding trade” in manufactured goods and services, encouraging “two-way investment” with “fair, level playing field for competition”. China also pledged to work on laws and regulations on intellectually property protections.

The Chinese state-owned Xinhua news agency described the statement as “vowing not to launch a trade war against each other”.

A part of the joint statement says: "There was a consensus on taking effective measures to substantially reduce the United States trade deficit in goods with China. To meet the growing consumption needs of the Chinese people and the need for high-quality economic development, China will significantly increase purchases of United States goods and services. This will help support growth and employment in the United States.

"Both sides agreed on meaningful increases in United States agriculture and energy exports. The United States will send a team to China to work out the details.

"The delegations also discussed expanding trade in manufactured goods and services. There was consensus on the need to create favorable conditions to increase trade in these areas.

"Both sides attach paramount importance to intellectual property protections, and agreed to strengthen cooperation. China will advance relevant amendments to its laws and regulations in this area, including the Patent Law.

"Both sides agreed to encourage two-way investment and to strive to create a fair, level playing field for competition.

"Both sides agreed to continue to engage at high levels on these issues and to seek to resolve their economic and trade concerns in a proactive manner."

Apparent Detente

The apparent detente comes after months of increasing tensions that have set markets on edge over fears of a damaging trade war, TRTWorld reported.

Trump has repeatedly railed against his country's trade deficit with China, describing it as a danger to US national security and threatening to impose tariffs on billions of dollars' worth of Chinese goods. US levies on $50 billion of Chinese imports could have come into effect as early as next week.

The talks in Washington were between delegations led by US Treasury Secretary Steven Mnuchin and Liu, who also met Thursday with Trump. The sides had met earlier in Beijing.

Meaningful Increases

Last year, the United States had a $375.2 billion trade deficit with China, with populist politicians blaming the Asian powerhouse for the leeching of American jobs over the last few decades.

Washington reportedly had demanded the deficit be slashed by at least $200 billion by 2020. However, the joint statement held no indication that China had assented to that target.

Liu said the new trade cooperation would extend to medical care, high-tech products, and finance, according to Xinhua.

They also agreed to strengthen cooperation on protecting intellectual property—a long-standing source of US discontent.

Trump had threatened China with tariffs on up to $150 billion of imports, prompting Beijing to warn it would target US agricultural exports, aircraft and even various others items.

Missing from the statement was news about the future of $66.6 billion worth of new trade sanctions and investment restrictions the US had been expected to enforce from Monday.

However a hint of what might happen can be gleaned from China's conciliatory step of halting the retaliatory sanctions imposed on around $1.3 billion worth of US sorghum shipments.

Ripped Off

The White House is wary of hurting largely Republican-voting farm states or damaging the economy before legislative elections this November. But Trump is also keen to appear tough on trade.

On Thursday, he unleashed a barrage of criticism against former US administrations, saying they had allowed Beijing to take advantage of the United States. "We have been ripped off by China. And an evacuation of wealth like no country has ever seen before given to another country that's rebuilt itself based on a lot of the money that they've taken out of the United States," he said.

"China has become very spoiled," Trump said.

The trade issue is complicated by the impending summit meeting in Singapore between Trump and North Korean leader Kim Jong-un, who has consulted with Chinese leader Xi Jinping.

China is North Korea's biggest trade partner, and Trump has called on it repeatedly to press Pyongyang to rein in its nuclear and missile programs.

The joint statement made no mention of Chinese telecom giant ZTE, which had suspended operations after US sanctions were imposed to punish it for exporting sensitive materials to North Korea.

Trump took observers by surprise last week when he tweeted that he and Xi were "working together" to find a way to help ZTE "get back into business, fast".

If the US and China face further difficulties in the future, Liu said: "We must look at them calmly, maintain dialogue and properly handle them."


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