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All Quiet on the Tariffs Front?

The Xi-Trump meeting concluded with the announcement of a 90-day truce. But as Washington and Beijing appear to have different perspectives on their agreement, the prospect of achieving a permanent cessation to the trade dispute is still uncertain

By NewsChina Updated Jan.1

The whole world watched as Chinese President Xi Jinping and his US counterpart Donald Trump met on the sidelines of the G20 summit held in Buenos Aires, Argentina on December 1, 2018. Over the past months, the escalating trade tension between the US and China, the world’s two largest economies, has injected much uncertainty into the global economy, causing anxiety over market instability and economic growth.  

Deal or No Deal?
Lasting two and a half hours, a full hour longer than scheduled, the dinner meeting reportedly concluded with a round of applause and a group photo session involving participants from both sides. The final deal appeared to be a temporary cessation in trade hostilities, with the US pledging not to ramp up tariffs on Chinese goods as it had pledged. But without a joint statement agreed upon by both sides, the two countries have emphasized different aspects of the agreement, leaving many to wonder what was really agreed upon and how long the truce can last. 

According to the statement released by the White House, Trump agreed to postpone by 90 days the increase in tariffs on US$200 billion worth of Chinese exports from 10 to 25 percent from January 1, 2019, to allow for further talks to address US concerns over China’s trade practices. 

“President Trump and President Xi have agreed to immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cybertheft, services and agriculture,” the White House said.  

The White House also said that China had pledged to buy a “very substantial” amount of agricultural, energy, industrial and other products from the US to reduce the trade imbalance between the two countries, and that China had agreed to start purchasing agricultural products from American farmers immediately. However, it warned that if the two sides failed to reach a final deal by the end of the 90-day period, the tariff hike would take effect.  

Compared to Washington’s victorious tone, Beijing’s rhetoric appeared rather reserved. Following its long-standing approach to its diplomacy with the US of placing emphasis on the cooperative and “win-win” nature of the bilateral relations, China portrayed the truce as a win for both countries. According to a statement issued by China’s official Xinhua News Agency, both countries decided not to impose new tariffs on imports from the other, and the US agreed not to increase its tariffs on Chinese exports to 25 percent.  

After the Argentina meeting, China’s Foreign Minister Wang Yi told media that the talks between Xi and Trump were “friendly and candid,” and that the two sides had reached an “important consensus.” Wang also said China will buy more from the US to address the bilateral trade imbalance, and will continue negotiations to address the “legitimate” concerns of the US, with the goal of “removing of all additional tariffs.” 

Concessions Made?
In comparison to Washington’s emphasis on the 90-day period, which some called a “reprieve,” Beijing’s initial response only acknowledged that a final deal was pending, but did not mention the 90-day period at all. Then on December 5, in a news briefing released by China’s Ministry of Commerce (MOFCOM) on its website, Chinese authorities finally acknowledged the existence of the 90-day period, saying that the two sides will follow a specific timeline and roadmap to push forward the negotiations.  

“We are confident that it [a final deal] will materialize,” says the statement. But at the same time, the statement also suggests that  China expects that all existing tariffs imposed since the trade war broke out will be rolled back if a final deal is reached. 

China’s rather reserved and cooperative tone, along with its apparent reluctance to mention the 90-day period, led many to suspect that China either has made or will make major concessions during its negotiations with the US.  

A day earlier on December 4, the country’s central bank, the People’s Bank of China, its top economic planner the National Development and Reform Commission and the National Intellectual Property Administration issued a memorandum on “conducting punitive actions against parties that seriously violate intellectual property rights,” which has been widely seen as the first step to address the issue of intellectual property rights protection.  

In the meantime, US Treasury Secretary Steven Mnuchin told CNBC Television that China offered to increase its imports from the US by US$1.2 trillion during the talks between Xi and Trump, a claim China has neither confirmed nor denied so far.  

These new developments seem to have reinforced the perception that China had made significant concessions. However, Beijing swiftly rejected such a notion. At another press conference on December 6, MOFCOM spokesperson Gao Feng insisted that China’s moves regarding protection of intellectual property rights and increasing foreign access to the Chinese market had long been part of China’s reform agenda.  

State media also weighed in, refuting the idea that Beijing is caving into Washington’s demands. The State-owned Global Times in a December 3 editorial claimed that the Trump administration was exaggerating its “victories” in its trade talks with China, in order to sway domestic public opinion in his favor over its handling of the trade dispute. “Because of electoral political pressure, Washington needs to hype its win in the trade war,” said the editorial. “China doesn’t have to compete for public opinion with the US. China instead thinks of the actual benefits of promoting reform and opening-up.”  

Following Mnuchin’s statement that China had agreed to purchase an additional US$1.2 trillion in US products and would move “immediately” on the commitment, the Global Times promptly published another editorial, saying that being able to fulfill such a commitment would depend on whether the US can actually supply Chinese demand. “If the US manufacturing system cannot live up to expectations and fails to deliver the goods China wants, then even God cannot help the White House,” said the editorial.  

China has long adopted an approach that focuses more on the cooperative and “win-win” aspect of the US-China relationship, and has been avoiding using confrontational language in public statements, making it difficult to gauge China’s bottom line. 

Citing unnamed sources close to the talks, one widely quoted commentary published by a social media account called “preaching to deaf ears”, later re-posted by the Xinhua News Agency, said that the US has listed 53 “structural problems” that it demands China to address. The article said that in response, China has further divided these issues into 142 items. “Based on China’s political and legal system, as well as its reform agenda, these items are categorized into three groups, those agreeable for mutual concessions, those that are negotiable and finally, those that are unacceptable,” the article said. 

It also said that China had raised its own concerns regarding various “chronic problems” with the American economy. “China should reject the unrealistic requests of the US, while taking a more proactive approach to some of its legitimate concerns,” it said.  

A man examines the interior of a motor home produced by a Sino-US joint venture at the 5th China Auto Camping Assembly in Wuhu, Anhui Province, November 2, 2018

A Ford Motor Company sign stands next to a Chinese national flag and Ford corporate flags in Shanghai, July 8, 2018

What’s Next?
It is still unclear whether some of the alleged Chinese concessions will take effect immediately or only after a final deal can be reached after the 90-day hiatus. For example, it was earlier reported that China has agreed to remove tariffs on imports of American soybeans during the Argentina talks. But US Agriculture Secretary Sonny Perdue told media on December 3 that it was “yet to be determined” whether or when China will do so. Perdue projected that China would probably resume buying American soybeans on January 1, 2019. The Chinese government has so far not commented on this issue.  

According to Mei Xinyu, a researcher with the Chinese Academy of International Trade and Economic Cooperation, an institute under MOFCOM, China has not fundamentally changed its approach during the Xi-Trump talks.  

During earlier talks between the two sides, Mei argued that China had three bottom lines – that it will only cooperate with the US to address the trade imbalance through increasing imports from the US, not by reducing exports to the US, that China does not accept the quota initially set by Washington to reduce the trade surplus by US$200 billion, and that China will not give up its rights and initiatives to upgrade its industry. Mei told NewsChina that China has given up none of these principles. China’s pledge to increase imports from the US is the only realistic path, he said.  
But Mei warned that as the US still insists on “having China take medicine in order to cure the ills of the US,” the trade dispute may not be over as soon as people hope and expect.  

“China should be prepared to withstand the combined impact of tariff increases on all its exports to the US and the resulting US economic recession,” Mei said. 

For Jin Canrong, a professor with the School of International Studies at the Renmin University of China, the significance of the Xi-Trump talks does not lie in any concrete agreement between the two sides, it lies in the fact they “put the brakes on” the ongoing trade conflict, which could very well spiral out of control and spill over to other fields. “Leaders from both countries showed their maturity and wisdom by showing a willingness to solve their disputes through dialogue,” Jin told NewsChina.  

But with more difficult negotiations on the horizon, the prospects for the trade relationship between the world’s two largest economies are still uncertain.