Trade war: China deal unlikely this week with US distracted by USMCA, but new tariffs not expected

Sources from Beijing and Washington continue to believe that tariffs planned for Sunday will be averted, due to economic pressure on both the US and China

New US tariffs could lead to China unleashing ‘unreliable entities list’ on US companies, while soaring inflation and falling exports press on Beijing to make deal

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New tariffs from China and the US are set to come into force on December 15. Photo: Reuters

Finbarr Berminghamin BrusselsandWendy Wuin Beijing

Published: 1:02pm, 10 Dec 2019Updated: 11:25pm, 10 Dec 2019

With US trade officials putting the final touches to the United States-Mexico-Canada Agreement, it is growing increasingly unlikely that a US-China trade deal will be completed this week.

POLITICO reported on Monday night that US trade representative Robert Lighthizer would fly to Mexico on Tuesday to finalise the deal, known as the USMCA, meaning time is running out to make a substantive agreement with China, sources on both sides said.

“A deal that is implementable must be concrete and detailed, which I don’t think can be concluded within days of December 15,” said Shi Yinhong, an adviser to the Chinese government and director at the Centre on American Studies at Renmin University, adding that “China is unlikely to give a specific commitment on how much US agricultural products it would buy”.

Despite this, sources close to the talks do not expect the tariffs planned for December 15 to come into force, adding to a growing chorus on both sides who expect de-escalation this week.

I don’t expect a final deal by the 15th. There are still difficult things to work out and Lighthizer is focused on the USMCA end game at the moment. That said, I’m not betting on tariffs either

Clete Willems

One reason a climbdown is expected is the fear that China might unleash an unreliable entity list targeting American companies. This list is in response to Washington’s own entity list, which forces American companies who wish to export products and software to named Chinese firms to apply for a licence from the US Bureau of Industry and Security.

“I don’t expect a final deal by the 15th. There are still difficult things to work out and Lighthizer is focused on the USMCA end game at the moment. That said, I’m not betting on tariffs either,” said Clete Willems, a partner at law firm Akin Gump and former deputy director of the US National Economic Council. “Another round of tariffs would likely yield the unreliable entities list from China, further political hardening, and all but end the chances of a deal before the election. I don’t think either side wants that.”

It is thought that the entity list was ready to go in August, but it was shelved after the US rescheduled tariffs planned for September to December 15.