The US has stepped back from the brink of a trade war with China after Washington halted plans to impose tariffs on up to $150bn of imports, according to the US Treasury secretary.
“We’re putting the trade war on hold,” Steven Mnuchin said in a television interview on Sunday.
The declaration from Donald Trump’s point man in trade talks followed a joint statement from the US and China on Saturday in which Beijing promised to “significantly increase” its purchases of American farm exports and energy and both sides said they would continue talking over the summer.
Saturday’s statement left out detailed targets after Chinese negotiators resisted a Trump administration push to make a commitment to increase purchases by $200bn annually. Critics in the US are also concerned that its main emphasis appears to be on meeting Mr Trump’s goal of reducing the US’s annual $337bn trade deficit with China rather than tackling more difficult structural issues in the Chinese economy, such as Beijing’s subsidisation of key industries and systemic theft of US intellectual property.
Mr Mnuchin insisted on Sunday that Chinese commitments to addressing such issues were part of the broader deal and warned that Mr Trump would be free to impose tariffs if Beijing did not live up to its commitments.
He said the two sides had made “meaningful progress”, adding: “We have agreed to put the tariffs on hold while we try to execute the framework.”
But he and other advocates within the administration of reaching a quick deal with Beijing face scepticism from a US business community that sees those structural issues as a more important endeavour than reducing the trade deficit.
The vagueness of Saturday’s statement illustrated what people briefed on the discussions said was the vast gap remaining between both sides and other administration officials conceded as much on Sunday. “There’s no agreement for a deal. We never anticipated one. There’s a communique between the two great countries, that’s all,” Larry Kudlow, the head of Mr Trump’s National Economic Council, said in a separate television interview.
The administration also faces another political firestorm at home over Mr Trump linking the trade talks to the possible lifting of a ban on Chinese telecoms equipment company ZTE sourcing chips and other parts from US suppliers. ZTE, which has long been the target of concern by US intelligence agencies, has admitted to both violating US sanctions on Iran and North Korea and breaking the terms of a $1.2bn settlement with the US government.
Resolving the ZTE situation had been the Chinese side’s top priority but the political reaction in Washington to a tweet by Mr Trump last weekend pledging to help the company return to business reduced the ability of the US to seal a deal and caused China to resist a commitment to a $200bn deficit reduction target, people briefed on the discussions said.
Mr Mnuchin conceded on Sunday that the ZTE matter had been discussed during negotiations last week but insisted that the US ban was an “enforcement matter”. Other US officials have raised the possibility of a deal that would see ZTE’s access to US parts restored in exchange for a change in management and other less stringent punitive measures.
Wilbur Ross, the US commerce secretary, would be travelling to China in the weeks to come to negotiate details of Chinese purchases, Mr Mnuchin said. But he said the US side had very specific “industry by industry” targets in mind, raising the possibility of a 35-40 per cent increase in agricultural imports this year and an additional $50bn-$60bn in annual US energy exports over the next three to five years.
“We are going to reduce the trade deficit,” Mr Mnuchin said.
He also, however, cautioned that the two governments did not wholly control whether that would happen, a point made by economists who say the imbalance between the world’s two largest economies has more to do with fiscal and macroeconomic trends than trade policy.
“Ultimately these are not government to government transactions,” Mr Mnuchin said. The Chinese commitment “is not a giant purchase order with US . . . This is about industry being able to have hard contracts and deliver these goods.”
