With Trade Talks Looming, U.S. and China Move to Relax Tensions

Source: By Ana Swanson and Alan Rappeport, New York Times • Posted: Friday, September 13, 2019

President Trump tweeted on Thursday that China would buy “large amounts” of American agricultural products.
Doug Mills/The New York Times

WASHINGTON — The trade war between the United States and China showed signs of easing on Thursday, as China reportedly made its first large purchase in months of American soybeans after President Trump agreed to briefly delay his next round of tariffs.

A trade deal between the two sides is not imminent, and deep divisions remain. But after weeks of escalating tariffs that have pushed the bilateral relationship to its rockiest point in decades, both countries appeared eager this week to try to calm tensions before a new round of talks next month.

Mr. Trump said on Thursday that China would resume purchases of American farm goods, and Beijing confirmed that Chinese companies were making inquiries about buying products including pork and soybeans.

The president’s announcement, made on Twitter on Thursday morning, followed a day of cooling tensions, in which China announced that it would grant some limited exemptions to its tariffs for American products, and Mr. Trump responded by promising to delay his next tariff increase by two weeks to Oct. 15.

“It is expected that China will be buying large amounts of our agricultural products!” the president said in his announcement.

Jim Sutter, the chief executive of the U.S. Soybean Export Council, said he learned on Thursday that China had made a large soybean purchase. Mr. Sutter said that between 12 and 20 cargo ships containing 600,000 to 1 million metric tons of soybeans were being purchased from export terminals in the Pacific Northwest for October shipments to China.

“We’re quite happy to see this apparent thaw in the relationship,” Mr. Sutter said. “We wish we could get trade back to normal.”

China’s Ministry of Commerce said some Chinese companies were beginning to make inquiries about resuming purchases of American agricultural products. “Soybeans and pork are all within the scope of inquiry,” said Gao Feng, a spokesman for the ministry. “I hope that China and the United States will move in the same direction and create favorable conditions for consultations.”

American and Chinese negotiators plan to meet in person in early October, before Mr. Trump increases tariffs on $250 billion worth of goods to 30 percent from 25 percent. Expectations for quickly resolving the significant differences between the two sides remain modest. But the recent de-escalation increases the likelihood that the next round of tariffs might be averted, perhaps eventually opening a path to an agreement that would smooth relations between the countries.

Markets, which have gyrated with every twist and turn in the trade war, rose on the potential that the two sides could ultimately reach a deal. U.S. stock indexes climbed before paring back some of their gains. The S&P 500 index was up 0.29 percent at the close of the day, while the Dow Jones industrial average gained 0.17 percent.

Relations between the countries have worsened since May, when China backed away from a nearly complete deal that would have required it to codify the agreement into Chinese law, which Beijing said would infringe on its sovereignty. Since then, Mr. Trump has placed tariffs on an additional $112 billion of Chinese products and threatened further tariff increases in October and December.

China has responded to the escalation by increasing tariffs on $75 billion of American goods. Chinese state-owned companies have also suspended their purchases of American soybeans, pork and other products, a severe hit to American farmers who have already lost markets because of the trade clash.

Although Mr. Trump’s advisers publicly insist that the trade war is having no effect on the American economy, many of them are eager to calm tensions. They have been reviewing ways to avoid planned tariff increases that would result in the United States taxing nearly every Chinese toy, sneaker and computer by the end of this year.

The president pushed back on reports Thursday that he was vying for an interim deal with China that would resolve only some issues. “I’d rather get the whole deal done,” he said, before adding, “It’s something we would consider, I guess.”

The administration has been weighing whether a deal with China would be a boon or liability to the president’s re-election. His advisers have been working for months to secure an agreement strong enough to dodge criticism from both Democrats and Republicans that Mr. Trump is folding to America’s biggest economic competitor.

Some White House officials, including the president’s son-in-law, Jared Kushner, have argued that the president does not need to seal a deal with China to win over voters. Mr. Kushner and others argue that if the administration can deliver other trade successes, like passing the revised North American trade agreement and announcing a trade deal with Japan, that will be enough to help rally the base, according to people familiar with their thinking.

But economic advisers like Steven Mnuchin and Larry Kudlow have been more attuned to the whipsawing financial markets and some flagging economic indicators and have advocated trying to reach a deal with China.

Discussions between the two countries have revolved around China strengthening its protections for American intellectual property, opening up its markets to competition from American firms and making large purchases of American products, like natural gas and soybeans.

The Trump administration has also pressed China to make more structural changes, for example rolling back the influence of state-owned enterprises in its economy. China has balked at making any concessions it sees as compromising its ability to manage its economy, or signing a deal it perceives as uneven. China has demanded that Mr. Trump remove the tariffs placed on $360 billion of Chinese products, as well as grant leniency for Huawei, the Chinese telecom giant the United States has cut off from purchasing American supplies.

Michael Pillsbury, a China scholar at the Hudson Institute who is advising the Trump administration in its negotiations, said the Chinese had been paving the way to better relations by toning down their formerly strident criticism of Mr. Trump and announcing several changes, including proposing more free trade zones around China that would feature open financial markets and better access for American companies.

“One swallow does not make a summer,” Mr. Pillsbury said, quoting a proverb. “But these gestures are now more and more numerous.”

Mr. Trump’s economic officials have also said the delay in tariffs could smooth relations.

Mr. Mnuchin, the Treasury secretary, said on Thursday that Mr. Trump was making a “good gesture” by agreeing to move the deadline by two weeks so that it did not conflict with China’s celebration on Oct. 1 of its founding 70 years ago.

“The president delayed it because of a request from the vice premier,” Mr. Mnuchin said on CNBC. “The optics of us raising the tariffs on Oct. 1, which is their 70th anniversary, caused them grave concern on the symbolism.”

Mr. Mnuchin would not comment on the whether the United States and China were discussing an agreement smaller in scope than they originally hoped. But asked about thorny issues, he made clear that the unrest in Hong Kong would not be part of the trade talks.

“Hong Kong is definitely not on the table,” he said. “That’s an issue for the secretary of state to deal with. That’s not a trade issue.”

Mr. Mnuchin did not address whether Huawei would be discussed. He said the critical issues in the negotiations remained the protection of American intellectual property, an end to China forcing American companies into joint ventures, currency manipulation and increased purchases of American agricultural products.

“We expect and we want them to buy agriculture,” he said. “We view that as a personal attack on our farmers.”

Some White House officials played down the significance of Mr. Trump’s reprieve on Thursday.

“It’s a small thing in the scheme of things,” Peter Navarro, Mr. Trump’s trade adviser, said on CNN, noting that the delay was for only two weeks. “The Chinese are paying the tariffs anyway.”

Mr. Navarro accused the Chinese of economic aggression and stealing American intellectual property. He also pushed back against Republican lawmakers, such as Senator Patrick J. Toomey of Pennsylvania, who have been voicing their frustration about the tariffs.

“He’s waving the white flag, not the American flag,” Mr. Navarro said of Mr. Toomey.

Mr. Navarro also seemed skeptical that China would actually step up its purchases of American agricultural products.

“Let’s see if the Chinese fulfill their commitments,” he said. “The problem we’ve always had with the Chinese is that they don’t necessarily honor their commitments.”