China Trade War Comes to a Temporary Halt

Cheryl Sanders
December 5, 2018

President Trump is touting great progress on trade talks with China, following his meeting with the Chinese president at the G20 summit.

10 percent tariffs on US$200 billion worth of goods, effective September 24, 2018. Trump wrote on Twitter.

Mr. Trump's tweet on the apparent deal on auto tariffs came a day after the White House said he and Chinese President Xi Jinping had agreed to a truce in the ongoing trade war, and Mr. Trump agreed not to raise us tariffs on Chinese goods any further for several months.

Also late Sunday, Trump said on Twitter that Beijing agreed to cut import duties on US autos.

On the non-trade issues, Beijing was more open, announcing that China will tighten supervision of Fentanyl and review rules on the drug. About 10 per cent, or more than 280,200, cars China imported past year came from the United States, according to China's Passenger Car Association.

When Beijing implemented the 40 percent rate for US imports in the summer, it also dropped its import tariff rate on vehicles from the rest of the world to 15 percent.

China retaliated by raising its own charges on US imports.

One expert said China would have to address United States complaints about China's forced transfer of intellectual property rights - a major issue at the core of a USA "301" trade investigation - for Washington to drop its tariffs.

For Beijing-based political consultant Hua Po, "this was a rare opportunity for China" to capitalize on what they saw as Trump's compromised position after the midterms.

However, Andrew Hunter, US economist for Capital Economics, said he is optimistic that the apparent "ceasefire" will hold, even though the two sides have been in similar positions before.

A White House statement said both sides would immediately begin talks over a wide range of issues, including forced technology transfers, intellectual property protection, non-tariff barriers and cyber intrusions.

Specifically, China highlighted that the two leaders plan to visit each other's countries at some point and that both sides would work toward scrapping all tariffs to reach a mutually beneficial, win-win agreement.

But observers warned there were still major issues that needed to be resolved, including access for U.S. companies and intellectual property protection.

Business groups have welcomed those changes but say they don't address more important complaints about a thicket of rules limiting access to China's finance, logistics and other industries.

The 90-day truce in the escalating trade war between the US and China came during a dinner meeting between the two presidents following the G-20 summit of the world's biggest economies in Buenos Aires.

The nationalist Global Times tabloid called it a "momentous step forward" that brings "huge potential for fair trade". According to a statement from the White House, both nations will attempt to come to a conclusion within the next 90 days, however, if no agreement is reached, then the 10 percent tariffs will be raised to 25 percent.

Trump hit an additional $200 billion of Chinese goods with a 10 percent tariff that had been due to rise to 25 percent on January 1. The tariff is now 40 percent. We are dealing from great strength, but China likewise has much to gain if and when a deal is completed.

In an editorial, the official China Daily said the new "consensus" was a welcome development but warned there was no "magic wand" that could make grievances disappear.

The meeting was indeed successful in that the two may have averted - at least for now - a deepening economic conflict between two of the world's biggest economies.

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