China-US Tariff Truce is Opportunity with Tight Time Frame

USA

03 December 2018, 15:50

M.News

China and the United States have agreed to put tariffs on hold and give negotiations a chance. But the short 90-day period the two have to finish negotiations, which includes major holidays both in Washington and Beijing, will require quick steps, analysts say, VOA news reports.

Truce in Trade War After Trump-Xi Dinner

Chinas pledges to purchase what the White House calls substantial amounts of agricultural, energy, industrial and other products are relatively straightforward. What will be more difficult are the other items that Washington said the two agreed on.

Those include the pledge to immediately begin negotiations on structural changes such as forced technology transfers, intellectual property protection, non-tariff barriers, cyber theft, services and agriculture.

Raymond Yeung, a senior economist of Greater China at the Australia and New Zealand Banking Group said that despite the tariff truce, resolving the differences between the two countries and making progress would not be easy.

Markets should not be too happy too early, he said. If you look at the White House statement there is still a lot of structural issues that the Chinese have to fulfill for the U.S. not to increase the tariffs.

Even so, Asian stocks rallied on Monday on news that the U.S. President Donald Trump and Chinese President Xi Jinping had agreed to not impose any new tariffs for the time being. Soybeans climbed to their highest price a bushel in nearly six months.

Liao Qun, chief economist at China Citic Bank International said it was clear that both governments want to talk and work out their differences and that is a positive thing.

But this is merely a cease-fire, he said. Theres still uncertainty that the trade war could be back on in three months.

Both Yeung and Liao said the key lies in what Beijing may be able to do to turn around its Made in China 2025 Initiative. Both analysts do not believe that the industrial policy, which aims to close up huge gaps between the Chinese economy and advanced industrial nations and cut the countrys reliance on foreign technology, will be reversed.

But some tweaks are possible, Liao said.

In principle, China won’t back down [on its Made in China 2025 plan]. But there is still room for negotiation on some aspects. Or maybe China can make concessions in other areas in exchange for keeping the plan intact, Liao said.

Made in China 2025 is a 10-year campaign that Beijing has launched to help vault itself up the technology value chain. Many foreign countries and investors worry the plan will only exacerbate existing problems such as forced technology transfers in exchange for market access, alleged intellectual property theft and market protectionism.

The Made in China 2025 plan outlines 10 key sectors in which China seeks advances, including information technology; robotics; medicine and medical devices; and high-tech ships and ocean engineering equipment.

Clearly, the message that both countries were trying to convey in the wake of the meeting was different. To get a sense of those differences, one only needs to look at the statements made by both sides in the wake of the meetings

Despite that both sides are claiming that it was a success if you look at the White House statement they dont even put trade up as the first item, Yeung said. Chinas Xinhua news agency did not even mention the 90-day period. That tariffs on $200 billion in Chinese goods could still be raised from 10 percent to 25 percent in 90 days if the two fail to reach a deal.

Not only that, but Chinese state media has been largely silent about other details, such as those touching on Made in China 2025 or the specifics of the trade dispute outlined in the White House statement.

An opinion piece in the communist party-backed Global Times said the meeting had given both sides an opportunity to make concrete strides.

The article mentioned the agricultural products that China had agreed to purchase, citing the White House statement, but said little about the other agreements made.

Interestingly, the article did note that White House trade policy adviser Peter Navarros attendance at the meeting in Buenos Aries was not necessarily a bad thing.

The article suggested that Navarros attendance perhaps shows the deal had the support from what the article said was trade hawks. Navarro is seen as one of the more hardline members of President Trumps team when it comes to economic issues with China.

An editorial in the China Daily, which has had very little detail on what the two presidents agreed on, said that while the positive and constructive consensus had helped to clear the air and create some breathing space for more rational thinking, lasting improvement is still dependent on the sincerity of the U.S. to engage in equal-footed consultations with China.