The world’s two biggest economies have pulled back from the brink of a trade war after making progress in talks aimed at bringing down America’s massive trade deficit with China.
“We are putting the trade war on hold,” Treasury Secretary Steven Mnuchin said.
Because of the progress made in negotiations, Mr Mnuchin said the Trump administration has agreed to put on hold punitive tariffs on up to $150 billion on Chinese products. China had promised to retaliate in a move that threatened a tit-for-tat trade war.
Both Mr Mnuchin and Larry Kudlow, head of the president’s National Economic Council, said that while China did not agree to meet the $200 billion deficit reduction goal that President Donald Trump has discussed, the Chinese agreed to steps that could ultimately mean big cuts in the trade gap between the two nations.
Mr Mnuchin said the actions which China has agreed to take as part of the framework the two countries have reached will result in boosting sales of US farm products to China by 35 to 40% this year.
He said the agreement could result in doubling sales of US energy products, which Mr Mnuchin said could mean an increase in sales by $50 billion to $60 billion over the next three to five years.
Mr Mnuchin said Commerce Secretary Wilbur Ross would soon be travelling to China to follow up on the discussions held Thursday and Friday in Washington.
It is likely that this agreement, weak and vague though it is, will serve as grounds to at least delay the imposition of tariffs.Eswar Prasad
On Saturday, the White House issued a joint statement from the world’s two biggest economic powers in which the US and China pledged to take measures to “substantially reduce” America’s massive trade deficit.
In the statement, Beijing committed to “significantly increase” its purchases of American goods and services, saying that the increase would “meet the growing consumption needs of the Chinese people and the need for high-quality economic development”.
The two countries also agreed on “meaningful increases” of US agriculture and energy exports and greater efforts to increase trade in manufactured goods and services. The US said it would send a team to China to work out the details.
The statement, however, provided no dollar amounts on how much China might boost its purchases of American products. Mr Kudlow said that the $200 billion reduction target “interests the president a lot” and that both US and Chinese negotiators have used that figure in the discussions “as a rough ballpark estimate.”
Last year, the US had a record deficit with China in merchandise trade of $375 billion, the largest with any nation.
Trade analysts said it was highly unlikely that China would ever agree to a numerical target for cutting the trade gap, but they said the talks were probably more successful in de-escalating trade tensions.
“It is likely that this agreement, weak and vague though it is, will serve as grounds to at least delay the imposition of tariffs,” said Eswar Prasad, an economist and trade expert at Cornell University.
“The Trump administration seems eager to engineer at minimum a temporary peace with China to ensure a smooth run-up to the Kim-Trump summit in June,” Mr Prasad said, referring to the June 12 meeting between President Donald Trump and North Korean leader Kim Jong Un.
Mr Trump campaigned in 2016 on a pledge to get tough on China and other US trading partners. He views the massive US trade deficit with China as evidence that Beijing is engaged in abusive trading practices and has outmanoeuvered previous US administrations.