WASHINGTON/CANBERRA – Trump administration officials have discussed offering a limited trade agreement to China that would delay and even roll back some U.S. tariffs for the first time in exchange for Chinese commitments on agricultural purchases and intellectual property, or IP, according to five people familiar with the matter.
Some of President Donald Trump’s top trade advisers have discussed the plan in recent days in preparation for two rounds of face-to-face negotiations with Chinese officials in Washington, due to take place in coming weeks, the people said.
The discussions are preliminary and Trump has yet to sign off on the plan.
The proposal would also be an interim deal that would freeze the conflict, rather than bringing a final resolution to a trade war that has cast a shadow over the global economy. U.S. stocks advanced on the news.
The plan reflects concerns within the White House over the recent escalation in tariffs and their economic impact on the U.S. going into an election year. Polls show the trade war is not popular with many voters and that farmers are increasingly angry over depressed commodity prices.
One of the main goals of the plan under discussion is to strike a deal that would allow the administration to avoid going ahead with more tariffs in December, which would hit consumer products ranging from smartphones to toys and laptop computers.
Also in play is a further delay in a tariff rate hike set to take effect in October. Late Wednesday, Trump tweeted that he was putting off the 5 percent increase in tariffs on Chinese goods, originally set for the first day of next month, until Oct. 15 — out of respect for the celebration of the 70th anniversary on Oct. 1 of the founding of the People’s Republic of China.
The Office of U.S. Trade Representative Robert Lighthizer did not respond to multiple requests for comment. The Treasury Department also didn’t respond and the White House declined to comment.
Exact details of a possible deal, such as what specific commodities and how much China will buy and when, still need to be worked out. But the idea is that the deal would include IP commitments that China had agreed to in negotiations in the spring before talks broke down, leading to a summer of escalation.
When those talks fell apart in May, the two sides were circulating a 150-page draft agreement. White House officials have repeatedly said they were 90 percent of the way to securing a deal.
China has insisted throughout the negotiations that any deal would have to see a withdrawal of U.S. tariffs.
It’s not clear if special licenses for Huawei Technologies Co. will be part of the deal, two of the people said, citing congressional worries over national security issues related to the Chinese company. China has made clear throughout the negotiations that it wants the U.S. to remove the company from its export blacklist, and denies claims that Huawei was spying for the Chinese government.
Chinese trade officials are expected to travel to Washington next week to make progress at a deputy-level before Lighthizer and Treasury Secretary Steven Mnuchin are scheduled to sit down with Chinese Vice Premier Liu He in early October. A firm date has not been set for the ministerial meeting.
If a deal like the one being contemplated comes to fruition during the forthcoming face-to-face meetings, it could lead to a hold on further U.S. tariffs and an eventual removal of the 15 percent tariffs on $112 billion in Chinese goods that went into effect on Sept. 1.
That would return the status of U.S. tariffs to about $250 billion in Chinese goods, and mark the first time the Trump administration has reduced tariffs on China since they were first introduced last year.
The discussions come amid growing evidence that the Chinese, U.S. and global economies are feeling the negative effects of the disputes. Manufacturing sectors around the world have gone into contraction in recent months. There are also signs that the manufacturing jobs gains on which Trump has built his case for re-election are going into reverse in some key industrial swing states.
Trump has insisted publicly that the U.S. is winning his trade war, and that he has no choice but to take on a China that for decades has swallowed up whole industries and been blamed for a cratering in manufacturing jobs since it joined the World Trade Organization in 2001.
Behind the scenes, some Trump advisers have grown increasingly nervous about the direction of the economy going into the 2020 election. While he has insisted that the U.S. economy is strong, Trump has also called increasingly loudly for the Federal Reserve to take what would normally amount to emergency measures to boost growth.
In a sign of his concern on Wednesday, Trump called for the Fed to follow the path taken by the European Central Bank and reduce interest rates “down to ZERO, or less,” as well as using that to refinance U.S. sovereign debt.
China, meanwhile, has been pursuing its own efforts to mitigate the damage of the trade wars.
Beijing this week lifted long-standing quotas on foreign investment in its stock and bond markets. It also announced Wednesday that it would exempt some U.S. products from the tariffs it has imposed over the past year, but did not lift duties on agriculture goods like soybeans and pork — politically-sensitive items for the U.S. president.
The process to exempt certain imports from the duties was aimed mainly at domestic constituencies in China. It is the equivalent of a U.S. mechanism to grant exclusions to U.S. importers for certain Chinese products. Trump on Wednesday nevertheless called the move “a gesture” and said China “did the right thing.”
In Canberra, the finance chiefs of Australia, Canada, Singapore and Indonesia have banded together to call for an end to the U.S.-China trade war as the long-running dispute roils markets and hampers economic growth.
“While we acknowledge that there are legitimate issues that must be addressed, the risks of collateral damage are growing,” they said in a joint statement published in The Australian newspaper on Friday, warning that the post-war multilateral system was under threat. “We have a responsibility to safeguard the institutions that have led to our shared economic success.”
The four ministers on Friday used the op-ed statement to lay bare the challenges facing their economies.
“Uncertainty over the outlook is contributing to a slowdown in trade and manufacturing activity,” the statement said. “We have seen a return of financial market volatility, currency instability and decreased capital flows to emerging economies. Dampened global trade conditions are affecting investor confidence, business investment and productivity. Growth has slowed and risks remain tilted to the downside.”