China Breaks Its Silence on 90-Day U.S. Tariff Truce

Date: December 5, 2018
Source: Wall Street Journal
MEMA Industry News Editor's Note: MEMA issued a statement on Dec. 3 regarding the current negotiations with China. The association is opposed to wide tariffs on autos and parts and has been encouraging the Trump administration to enter into bilateral discussions with China to resolve the differences. Detailed information about tariffs as well as other recent trade actions can be found on the MEMA Trade Resources Page or the MEMA Trade FAQs. For more information about MEMA’s trade positions, contact Catherine Boland.
 
BEIJING -- China is beginning to flesh out details of a weekend tariff truce with the U.S., after days of vague Chinese statements and a barrage of comments from President Trump and other administration officials.
 
China’s Commerce Ministry in a statement today acknowledged for the first time that Beijing on Dec. 1 agreed to a 90-day cease-fire to allow negotiations to take place. The statement, attributed to an unnamed spokesman, said that the negotiations have a “clear timeline and road map” and that China aims to quickly implement “an agreed upon consensus.”
 
Also this week, key government agencies and China’s supreme court announced tough punishments for infringing on intellectual property -- a prominent complaint by the Trump administration.
 
Together, the moves begin to fill in some of Beijing’s understanding of the agreement between Trump and President Xi Jinping. Right after the presidents’ dinnertime parlay, Chinese officials said the two sides agreed to put tariffs in abeyance to negotiate a settlement but offered few other details then and in the days since.
 
In the meantime, tweets from Trump, as well as statements from him and top administration officials, have described concessions Beijing purportedly made -- including a reduction in tariffs on American-made autos and an agreement to purchase a “very substantial” amount of agricultural, energy, industrial and other products from the U.S.
 
The Commerce Ministry’s statement didn’t mention purchases of agricultural and other products, tariff reductions for imports of U.S. autos or negotiating about intellectual property protection, technology transfers and other structural issues the U.S. says are on the agenda.
 
Chinese officials have suggested that China will step up purchases of U.S. farm and energy products such as soybeans and natural gas as part of Dec. 1’s deal. Demand for those products is immense. Still, it’s unclear how large China’s purchases will be and whether Beijing will remove the punitive tariffs or offer rebates to the buyers.
 
Many Chinese economists and academics view Trump’s trade strategy as stirring up confusion in order to draw out concessions from Beijing.
 
“China should prepare but not rush to make concessions,” said Yu Yongding, a researcher with government think tank Chinese Academy of Social Sciences and former adviser to China’s central bank. “This is a competition of endurance to see who breaks first.”
 
Should talks fail to yield an agreement, the Trump administration has said it would move ahead with raising tariffs on $200 billion of Chinese goods to 25 percent, from 10 percent currently. The increase was originally set for Jan. 1, and in the lead-up to the Trump-Xi summit, Chinese officials said getting a stay on the increase was paramount since they didn’t want to negotiate under threat.
 
President Xi is under pressure to strike a deal. Economic growth is flagging; today, the cabinet agreed to increase unemployment insurance tax rebates to companies that don’t lay off workers. Xi is also facing criticism from within the Communist Party for stoking tensions with the U.S., adding drag to the slowing economy and alienating China’s neighbors.
 
Beijing still has yet to confirm many of the items the Trump administration has said were decided on Dec. 1.
 
The Commerce Ministry’s statement also didn’t specify a start date for negotiations nor say when the 90-day clock would start ticking; U.S. officials, after some confusion, say it started on Dec. 1, meaning the deadline would fall around March 1. Trump has tweeted that the deadline could be extended.
 
China’s acknowledgment of the 90-day time cap signals acceptance of one U.S. term to the trade truce. Likewise, the punishment for intellectual property theft is progress on a problem Beijing has promised to resolve but taken few steps to do so.
 
In a recent joint statement, three dozen Chinese government agencies and official bodies laid out 38 punishments for companies that violate intellectual property rights. The punishments go into effect this month and include restricting the violators’ access to financing, including state subsidies.
 
The statement was dated Nov. 21 but only made public on Dec. 4. The National Development and Reform Commission, China’s top economic planning agency and the lead body in the initiative, didn’t immediately respond to a request for comment on the time lag.
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