China and United States trade officials will deliberate plans for China to buy more U.S. farm products. In return, Beijing will ask for the cancellation of some planned and existing U.S. tariffs on Chinese imports.
The U.S. Trade Representative, U.S. Treasury Secretary, and Chinese Vice Premier will speak by telephone. Their latest attempt to cool down an almost 16-month trade war roiling financial markets. Also, it is disrupting supply chains and slowing global economic growth.
China’s President and U.S. President are working on trying to agree on a text for a “phase 1” trade agreement. Both presidents will sign the deal in Chile next month.
Trump has only agreed to revoke an Oct. 15 increase in tariffs on $250 billion in Chinese goods. In addition, this will be a part of the understanding reached on agricultural purchases and increased access to China’s financial services markets.
Contrarily, Beijing will ask Washington to cancel its plan to impose tariffs on $156 billion worth of Chinese goods, to seal the deal.
Beijing also is likely to ask the removal of 15% tariffs imposed on Sept. 1 on about $125 billion of Chinese goods. Trump imposed the tariffs in August after a failed round of talks. Additionally, it effectively set-up disciplinary duties on nearly all of the $550 billion in U.S. imports from China.
Moreover, the Chinese want to get back to tariffs on just the original $250 billion in goods.
A China expert at the AEI in Washington said the initial goal of the talks was to settle a text on intellectual property. Also, it will be for agriculture and market access to pave the way for a cancellation of the Dec. 15 tariffs.
China Smaller Purchases
United States agricultural products from tariffs will exempt by Beijing. This includes soybeans and wheat and corn. Also, consumers will be exempt from extra tariffs for future purchases and get returns for tariffs they paid in previous purchases.
The ultimate amounts of China’s purchases are unclear. Trump has brag purchases of $40-50 billion annually. This is far above China’s 2017 purchases of $19.5 billion as measured by the American Farm Bureau.
China’s offer would begin at around $20 billion in annual purchases, mainly restoring the pre-trade-war status quo. On the contrary, this could increase over time. Also, investments would rely on market pricing and conditions.
Robert Lighthizer emphasized China’s contract to remove some restrictions on U.S. inherently modified crops and other food safety barriers. Besides, it will be significant since it could brick the way for higher U.S. farm exports to China.
The high-level call comes after U.S. Vice President railed against China’s trade work and development of a “surveillance state” in a significant policy speech. But, he left the talk open to a trade deal with China since Trump wants a “constructive” partnership with China.
Furthermore, the U.S, tariffs on Chinese goods has brought China to the negotiating table to talk about U.S. complaint about its trade practices.
The U.S.-China talks change very quickly from hot to cold. The longer it takes to establish agreements for the easy phase 1, the harder it is to imagine a phase 2 breakthrough.
Mnuchin and Lighthizer will travel to Beijing the week of Nov. 3 for more in-person talks to finalize a text. Contrarily, a Treasury spokesman said there is no plan for such a meeting.
- Trading Instrument