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Vice-Premier Liu He (right), US trade representative Robert Lighthizer (third left) and US Treasury Secretary Steven Mnuchin (second left) agreed in Shanghai at the end of July that they would hold the next face-to-face meeting in Washington in September. Photo: AP

US-China trade war takes a breather as Beijing sees ‘positive signal’ in Donald Trump’s tariff delay

  • Planned levies on many of the US$300 billion of Chinese products threatened to start in September have either been delayed or removed
  • Vice-Premier Liu He talked with US trade representative Robert Lighthizer and Treasury Secretary Mnuchin, expressing ‘solemn representations’ over the tariffs

Escalating trade tensions between China and the United States eased slightly on Wednesday as Beijing hailed the decision by US President Donald Trump to delay or remove some planned tariffs against Chinese products as a “positive signal”.

The small ceasefire, announced by Trump on Tuesday, came after Vice-Premier Liu He, China’s lead trade negotiator, talked with US trade representative Robert Lighthizer and US Treasury Secretary Mnuchin by phone on Tuesday.

Liu, though, did lodge “solemn representations”, a diplomatic phrase for a formal complaint, to the US about its tariff plans, according to the official Xinhua News Agency. It is the first time that China’s official statements about trade talks had included such a phrase, reflecting Beijing’s unhappiness about Trump’s tariff threats and its overall hardened stance against in the trade talks.

The Office of the US Trade Representative confirmed after the call that the levying of the 10 per cent tariff on US$155 billion of products such as “cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing” would be delayed until December 15. It also said other products on the original tariff list, including safety devices such as children’s car seats, would now not be subject to the tariff.

Trump had threatened to impose a blanket 10 per cent tariff on US$300 billion of Chinese products in September, but now only US$130 billion will be subject to the new tariff.

China did not immediately respond with concessions of their own, although another call has been agreed to take place within the next two weeks.

Tuesday’s phone call “showed the outside world that communication channels remain open for the two sides and both sides have the willingness to talk further. It’s a positive signal in recent days”, said Taoran Notes, a Chinese social media account affiliated with the official Economic Daily, said on Wednesday.

Chinese Commerce Minister Zhong Shan, People’s Bank of China Governor Yi Gang as well as National Development and Reform Commission deputy chairman Ning Jizhe also took part in the call.

Is Trump really going to accept an offer or is he going to view an offer as a negotiating ploy, and just want more and more
Frank Lavin

Frank Lavin, head of the International Trade Administration for the US Department of Commerce under president George W. Bush, said Trump is “taking a step backwards, away from conflict, in the hopes of China might move”.

“Is Trump really going to accept an offer or is he going to view an offer as a negotiating ploy, and just want more and more? So there has to be a way for Trump to signal that he realises it is a good faith offer. It is meaningful, it is material.”

Trade relations between the world’s two largest economies have quickly worsened over the last two weeks after Trump’s threat to impose tariffs on all Chinese products broke the truce agreed with President Xi Jinping in Osaka at the end of June.

China responded by halting purchases of US farm products and allowing the yuan to fall below the key level of 7 to the US dollar for the first time in 11 years, which the US used as an excuse to officially label China a currency manipulator.

The escalation of tensions roiled global markets due to increasing worries that they could lead to a global economic recession. The levying of tariffs on Chinese-made consumer products for the first time also threatened a drop in sales and job cuts for US retailers during the Christmas shopping season.

US retailers are already cutting jobs at the highest rate in a decade, with almost 43,000 jobs cut in the first seven months of the year, up 40 per cent from the same period last year, according to a report from outplacement firm Challenger Gray & Christmas.

The impact of the trade war on Chinese growth is also increasingly visible after industrial production in July grew at its lowest rate since February 2002, while the retail sector also took a further hit, the National Bureau of Statistics said on Wednesday.

Vice-Premier Liu, Lighthizer and Mnuchin agreed in Shanghai at the end of July that they would hold the next face-to-face meeting in Washington in September, and a former Chinese vice-commerce minister confirmed earlier this week that the meeting was still set to take place.

At the same time, the Chinese official media is filled with increasingly vitriolic rhetoric that Beijing will not yield to the “maximum pressure” or “bullying” being employed from the US.

It would look bad for [Trump’s] re-election if the trade war impact starts to reflect on consumer data in November and December
Shen Dingli

Hua Changchun, an economist with brokerage firm Guotai Junan Securities, said the tensions may shift to the financial realm.

“The battle in tariffs may be on pause, but a financial war could start,” Hua warned.

Shen Dingli, a Shanghai-based US expert, said he thinks Trump’s move to amend his initial tariff threat was mainly driven by his intention to manage the year end economic performance in the US to prepare for his presidential campaign.

“It would look bad for his re-election if the trade war impact starts to reflect on consumer data in November and December. His move was also being opposed by many industries in the US, especially the tech giants, he must also manage their support,” said Shen.

“We can see this as a temporary easing of tensions in the China-US trade talks, but the US should not have threatened to increase tariffs while the trade talks were going on in the first place.”

This article appeared in the South China Morning Post print edition as: Beijing welcomes ‘positive signal’ of Trump tariff delay