World Economy

Trump Succumbs to Pressure, Retreats From China Tariffs

A senior Trump aide says China is pushing Trump around, and he seems to accept it while the Chinese are doing what they’ve always done: put in significant delay tactics
US, China are nearing a deal to remove American sales ban against ZTE.US, China are nearing a deal to remove American sales ban against ZTE.

US President Donald Trump retreated from imposing tariffs on billions of dollars worth of Chinese goods because of White House discord over trade strategy and concern about harming negotiations with North Korea, according to people briefed on the administration’s deliberations.

Trump also succumbed to pressure from farm-state Republicans, who heavily lobbied the White House to resolve its trade differences with China, which had especially targeted US agricultural products with planned retaliatory tariffs, Bloomberg reported.

Treasury Secretary Steven Mnuchin said Sunday that the administration’s plan to impose tariffs had been suspended, and Trump said on Twitter on Monday that the Chinese had agreed to purchase unspecified amounts of American farm products. Some of his loyalists led by former chief strategist Steven Bannon criticized the deal as a capitulation.

The agreement at least delays a trade war between the world’s two largest economies, a prospect that has rattled financial markets for months. But many US concerns about China’s economic practices remain unresolved: its acquisition of American technologies; the country’s plans to subsidize the growth of advanced domestic industries such as artificial intelligence and clean energy; and US companies’ access to China’s markets.

Bannon blamed Mnuchin. Trump “changed the dynamic regarding China but in one weekend Secretary Mnuchin has given it away,” he said in an interview. “Mnuchin has completely misread the geopolitical, military and historical precedents, and what Trump had done was finally put the Chinese on their back heels.”

Some White House officials blame poor coordination among the warring factions in Trump’s economic team for the retreat, according to several people briefed on the matter. Within the administration, divisions are raw between free-trade supporters such as Mnuchin and White House economic adviser Larry Kudlow and China hawks led by White House trade adviser Peter Navarro.

During a trip to Beijing earlier this month, Navarro and Mnuchin argued about the US negotiating position, and Navarro wasn’t deeply involved last week in negotiations with a Chinese delegation in Washington.

Settlement on ZTE

The divisions are apparent in Trump’s public actions. In April, the commerce department cut off Chinese telecommunications company ZTE Corp. from its American suppliers in response to what Commerce Secretary Wilbur Ross called “egregious” violations of US sanctions.

The ban deprived the brand of key smartphone components, including mobile chips from US chip designer Qualcomm.

The Wall Street Journal reported that China and the US have agreed on the “broad outline” of a settlement to the seven-year ban on ZTE.

Trump's administration is working on details of a deal with the Chinese, and may lift a ban on US companies selling hardware and software to ZTE if it works out, the WSJ reported late on Monday.

In exchange for Trump's removal of the ban, ZTE will make major changes in management, board seats and potentially pay fines, according to the journal. Details of the deal are still being worked out, it added.

“China is pushing the president around, and he seems to accept it,” Senator Chuck Schumer of New York said in a speech on Monday. “The way to win real concessions from China is to stay tough, not to bluster and back off at the first sign of friction.”

North Korea Specter

Looming large over negotiations with China are separate but inextricable talks with North Korea over its nuclear weapons program. Trump is counting on Chinese President Xi Jinping to maintain pressure on North Korean leader Kim Jong-un, whose country is economically dependent on China.

Last week, North Korea’s state-run news agency and top officials began issuing threats to back out of a planned June 12 summit in Singapore between Trump and Kim. Trump suggested himself that Xi was pulling strings in Pyongyang to put pressure on US trade negotiators.

Catastrophic Tariffs

“It would be catastrophic,” Senator Chuck Grassley of Iowa said. The Chinese had targeted soybeans, one of his state’s top exports to the country, as one product for retaliatory tariffs. “We have made the case to the White House at least twice in the last four months,” he said in an interview.

But Trump loyalists including Bannon and campaign trade adviser Dan DiMicco were among the loudest critics of the president’s retreat.

“It gives the appearance that the Chinese are doing what they’ve always done to us: put in significant delay tactics,” DiMicco, who now serves on an advisory committee for the US trade representative, said in a phone interview. “It’s a road we’ve been down for 25 years and has gotten us nothing but trouble—more theft of IP, more stealing and hacking of proprietary information of companies in this country, ever growing trade deficit in manufactured goods.”


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