The White House has agreed to suspend some tariffs on Chinese goods and reduce others in return for Beijing’s pledge to hike purchases of U.S. farm products in 2020, sources said on Thursday, taking a step towards de-escalating the trade war between the world’s two biggest economies.
A sourced briefed on the status of bilateral negotiations said the United States would suspend tariffs on $160 billion in Chinese goods expected to go into effect on Dec. 15 and roll back existing tariffs.
In return, Beijing would agree to buy $50 billion in U.S. agricultural goods in 2020, double what it bought in 2017, before the trade conflict started, two U.S.-based sources briefed on the talks said.
The White House didn’t release any official statement, raising questions about whether the terms had been agreed by both sides.
Two people familiar with the negotiations had said earlier on Thursday that U.S. negotiators were offering to cut existing tariffs on Chinese goods by as much as 50% as well as suspend the new tariffs scheduled to go into effect on Sunday in an attempt to secure a “Phase 1” deal first promised in October.
The U.S.-China trade war has slowed global growth and dampened profits and investment for companies around the world. The United States has announced $28 billion in subsidies for American farmers affected by the dispute.
“If signed, this is an encouraging first phase that puts a floor under further deterioration of the bilateral relationship,” said U.S.-China Business Council President Craig Allen. “But this is just the beginning. The issues facing the US and China are complex and multi-faceted. They are unlikely to all be resolved quickly.”
China bought $24 billion in U.S. farm products in 2017, according to U.S. Department of Agriculture figures.
AN AG BUY TURNAROUND
Trump said in a White House news conference on Oct. 11 with Chinese Vice Premier Liu He that the two countries had agreed to a “Phase 1” trade deal on “intellectual property, financial services” and a “purchase of from $40 (billion) to $50 billion worth of agricultural products.”
A written agreement would be available in weeks, Trump said at the time, adding, “we’ve agreed in principle to just about everything I mentioned, all of the different points.”
Beijing has since balked at committing to buy a specific amount of agricultural goods during a certain time frame, however. Chinese officials said they would like the discretion to buy based on market conditions.
After the October news conference, analysts questioned here whether the $50 billion figure was realistic.
Soybeans made up half of China’s agricultural purchases in 2017. Demand has since cratered because the pig herds that eat it have been decimated by African swine fever.
Chinese officials have demanded the United States roll back tariffs that Trump put in place as a condition of any “Phase 1” deal. The Trump administration has put tariffs on hundreds of billions of dollars in Chinese imports, starting in July 2018.
Although there appeared to be an agreement in principle, it was unclear whether it was a written, actionable deal, or whether Beijing had agreed to it, said one Washington-based source familiar with the talks.
“Until the full text is released, it’s not particularly actionable. It’s very unclear to me: Is this an agreement in principle or is it an agreement?” the source said.
If Trump does not suspend the tariffs scheduled to go into effect on Sunday, Beijing officials will apply more tariffs on U.S. goods and may suspend talks until after the U.S. presidential election in November 2020, trade experts believe.
The new tariffs would apply to almost $160 billion of Chinese imports such as video game consoles, computer monitors.
In August, China said it would impose 5% and 10% in additional tariffs on $75 billion of U.S. goods in two batches. Tariffs on the first batch kicked in on Sept. 1, hitting U.S. goods including soybeans, pork, beef, chemicals and crude oil.
The tariffs on the second batch of products are due to be activated on Dec. 15, affecting goods ranging from corn and wheat to small aircraft and rare earth magnets.
China also said it will reapply on Dec. 15 an additional 25% tariff on U.S.-made vehicles and 5% tariffs on auto parts that had been suspended at the beginning of 2019.