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Original US-China Tariffs Now Major Obstacle In Trade Talks

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Via Zerohedge

Futures dipped after the Wall Street Journal reported that punitive tariffs exchanged between China and the United States are now posing a major obstacle in ongoing trade talks between the two nations. 

US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin resume high-level talks with China on Tuesday – which will be followed next week by their counterparts traveling to Washington next week for another round of talks which officials and business groups say could result in a deal. 

That said, “how and whether to remove the tariffs the two governments imposed in the earliest phases of the dispute are now at the forefront of the talks,” according to the Journal, citing people briefed on the negotiations. 

At issue is how much of the tariffs the U.S. levied on $250 billion of Chinese goods will be removed, according to the people. The U.S. wants to leave some in place as a tool to enforce the agreement while Chinese negotiators see those tariffs as an affront, and negotiators have batted the issue back and forth for at least a month. –Wall Street Journal

“The tariffs are the leverage to move the deal past the finish line,” said Jake Parker, Vice President of the US-China Business Council in Beijing. “It’s natural the details of drawdown timelines would be among the last items negotiated.”

U.S. Trade Representative Robert Lighthizer, center, arrives at a Beijing hotel Tuesday ahead of the latest round of U.S.-China trade talks. PHOTO: GREG BAKER/AGENCE FRANCE-PRESSE/GETTY IMAGES

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Aside from Tariffs, the negotiators are trying to find solutions in other areas – such as persuading Beijing to expand access to China’s cloud computing market and agricultural markets, according to business and farm groups. 


Neither Mr. Lighthizer nor Mr. Mnuchin would comment on specifics as they walked past reporters after arriving in Beijing. Mr. Mnuchin said that the focus of this week’s talks is “broad” and that “we’ve made a lot of progress.”

On Monday Mr. Mnuchin told Fox News that the enforcement mechanism still “needs a little bit of fine tuning” and that “if we get to a completed agreement, it will have real enforcement provisions.” –Wall Street Journal

According to people familiar with Beijing, their primary concern is that the US continues to insist on imposing tariffs, while preventing China from retaliating in order to make sure Beijing fulfills commitments in a trade deal.  

“Beijing absolutely doesn’t want to give in on this,” said one WSJ source, who noted that the tariffs would be an embarrassment for leadership and a tough sell to Chinese businesses and domestic counterparts. Investors are also taking note. 

“The U.S. has already hurt the confidence of the Chinese people,” by initiating a trade war, and should eliminate tariffs immediately upon inking a deal, according to Mei Xinyu – a senior researcher at the Chinese Academy of International Trade and Economic Cooperation – a think tank affiliated with the Commerce Ministry. 

“Bringing back tariffs would break any trust even further.” 

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