BEIJING- Tariffs must be cut if China and the United States are to reach an interim agreement on trade, the Asian nation’s commerce ministry said on Thursday, sticking to its stance that some US tariffs must be rolled back for a phase one deal.
“The Chinese side believes that if the two sides reach a phase one deal, tariffs should be lowered accordingly,” ministry spokesman Gao Feng told reporters, adding that both sides were maintaining close communication.
On a telephone call last week, China’s lead trade negotiator Vice Premier Liu He discussed “core issues of concern” with US Trade representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin.
Completion of a phase one deal between the world’s two biggest economies had been initially expected in November, ahead of a new round of US tariffs set to kick in on Dec. 15, covering about $156 billion of Chinese imports.
On Nov. 7, Gao said China and the United States must simultaneously cancel some existing tariffs on each others’ goods for both sides to reach a phase one trade deal, but how much tariffs should be cancelled could be negotiated.
Washington imposed additional 15 percent tariffs on about $125 billion worth of Chinese goods on Sept. 1, on top of the additional 25 percent tariffs levied on an earlier $250 billion list of industrial and consumer goods.
US President Donald Trump and Lighthizer recognize that rolling back tariffs for a pact that fails to tackle core intellectual property and technology transfer issues will not be seen as a good deal for the United States, a person briefed on the matter told Reuters previously.
On Wednesday, Trump said trade talks with China were going “very well,” sounding more positive than his remarks the previous day that a trade deal might have to wait until after the 2020 US presidential election.
Meanwhile, China’s exports are expected to have risen for the first time in four months in November, a Reuters poll showed, though a protracted trade row with the United States and slack global demand mean a sure-footed turnaround in shipments is some way off.
Exports by the world’s second-largest economy likely rose 1.0 percent from a year earlier last month, according to a median estimate from a Reuters poll of 20 economists, improving from a 0.9 percent drop in October and marking the first pickup since a 3.3 percent rise in July.
Imports are forecast to have dropped 1.8 percent from a year earlier in November, also a slower rate of decline from the 6.4 percent slump the month before, the poll showed.
Beijing and Washington remain locked in weeks of negotiations to ink an interim “phase one” trade deal aimed at de-escalating the 17-month-long dispute that has led to tit-for-tat tariffs. US President Donald Trump said on Wednesday that trade talks are “going well,” a day after spooking markets with a warning that the deal might have to wait until after the November 2020 US presidential elections.
The trade row between the world’s two biggest economies has weakened corporate profits, investment and global growth.
Washington has given no indication that it plans to scrap new tariffs on $156 billion worth of Chinese imports scheduled for Dec 15, which could torpedo the negotiations. US legislative action supporting Hong Kong protests and condemning the camps for ethnic Muslim minorities in the Western Chinese region of Xinjiang have also angered Beijing.
“Should the tariffs…take effect as planned, a phase 1 deal would be very much in doubt,” Commerzbank analyst Hao Zhou and economist Bernd Weidensteiner said in a note published Wednesday. “Then, the markets could repeat the massive meltdown as happened in last December as President Trump kept up pressure on trade issues.”
Chinese foreign ministry spokeswoman Hua Chunying warned on Wednesday the Xinjiang bill will affect bilateral cooperation and that China will take “decisive” countermeasures to defend its interest if what she called US protectionism and bullying over trade continues.
Analysts say an escalation of the trade war would further undermine China’s economy at a time when growth fort 2019 is already expected to slip to its weakest in decades. Gross domestic product growth in the third quarter slumped to near 30-year lows.
Though an official survey on manufacturing showed an unexpected expansion in activity last month, falling industrial profits and factory prices suggest persisting downward pressure.
“We will face even greater risks and challenges next year,” Chinese Premier Li Keqiang was quoted as saying in a government statement during a meeting of the nation’s cabinet on measures to support employment.
Despite the growing strains on the economy, Beijing remains reluctant to implement major stimulus for fear of heightening financial risks given already high levels of debt. Authorities have instead opted for more targeted measures such as incremental interest rate reductions and bringing forward 1 trillion yuan ($142.07 billion) of the 2020 local government special bonds quota to this year.
People’s Bank of China Governor Yi Gang reiterated in a signed article published on Sunday that China will not resort to quantitative easing and is committed to maintaining a prudent monetary policy. – Reuters