US-China Trade Cease Fire Does Little to Narrow Differences

TEHRAN (defapress) - A US-Chinese cease fire on tariffs gives jittery companies and investors a respite but is no sign the two sides have changed stances in a war over Beijing's technology ambitions that threatens to chill global economic growth.

News ID: 74094

Date: 03 December 2018 - 13:35

On Monday, Asian stock markets welcomed President Donald Trump's agreement to postpone US tariff hikes on Chinese goods for 90 days while the two sides negotiate. Chinese President Xi Jinping promised in exchange to buy more American exports.

China's main market index was up 2.7 percent, while Tokyo rose 1.0 percent.

The outcome of the weekend Xi-Trump meeting in Argentina was "as good as we could have expected," the chairman of the American Chamber of Commerce in China, William Zarit, said in a statement, AP reported.

There was no sign, however, of progress in their core dispute: American pressure on Beijing to roll back industry plans that Washington says are based on theft and violate Chinese market-opening obligations.

"It's impossible for China to cancel its industry policies or major industry and technology development plans," said economist Cui Fan of the University of International Business and Economics in Beijing.

Trump's promise gives Xi political room to negotiate after Beijing said earlier talks were impossible while Washington "holds a knife" of tariff threats to Beijing's throat. But both leaders still face a complicated mix at home of economic nationalists, free trade advocates and other conflicting forces.

Without progress, Trump will face renewed pressure from hardliners to resume escalating the tariff fight.

Trump imposed a tariff hike of 25 percent on $50 billion of Chinese imports in July over complaints Beijing steals or pressures companies to hand over technology. Trump hit an additional $200 billion of Chinese goods with a 10 percent tariff that had been due to rise to 25 percent on Jan. 1.

China retaliated by raising its own charges on US imports.

The American complaints strike at the heart of a development strategy Chinese leaders see as a route to prosperity and global influence.

They have offered to alter details but reject pressure to discard blueprints such as "Made in China 2025," which calls for state-led creation of Chinese champions in robotics and other fields.

Those are "central to Xi's core agenda of making China an innovation superpower," Michael Hirson, Jeffrey Wright and Paul Triolo of Eurasia Group said in a report. It is linked to "intense geopolitical competition" with Washington.

Negotiators face a daunting agenda and a 90-day window to produce progress.

The weekend agreement indicates "dialogue will intensify," but China will need to "agree to very substantial measures" to reach an agreement, said Rajiv Biswas of IHS Markit in a report.

Cui put the odds of an agreement at "higher than 50 percent" but said he had no idea how long that might take.

Beijing previously agreed to narrow its trade gap with the United States by purchasing more soybeans, natural gas and other exports but scrapped that after Trump's tariff hikes went ahead. Xi's weekend agreement is along similar lines, pledging to buy a "not yet agreed upon, but very substantial amount of agricultural, energy, industrial" and other American exports.

Xi's government has announced a drumbeat of changes this year that Washington and other trading might have welcomed at another time as progress. But they have been overshadowed by the tariff battle.

While Beijing retaliated for US tariff hikes by imposing penalty charges on American soybeans, autos and other goods, it has cut duties on factory machinery and other imports from other countries.

The government also has promised to ease limits on foreign ownership of automakers, insurance ventures and other companies.

Business groups welcome those changes but complain over other rules limiting access to markets including finance, logistics and agricultural technology.

Companies want a "genuine response to those concerns, with measurable goals," Kenneth Jarrett, the president of the American Chamber of Commerce in Shanghai, said in an email.

Threats of additional US penalties loom in the background.

Trump has said he might consider raising tariffs on all remaining Chinese imports, or about $267 billion of goods. US Trade Representative Robert Lighthizer complained last week China's 40 percent tariffs on imports of US-made autos are higher than Washington's 27.5 percent rate for Chinese vehicles and said he was looking at ways to equalize US duties.

Trump tweeted late Sunday that China promised to drop the 40 percent auto tariffs. There was no immediate response Monday from the Chinese Commerce Ministry about whether Beijing had made such a pledge.

China has its own demands. Beijing is unhappy with US limits on exports of "dual use" technology with possible military applications. Xi's government complains Chinese companies are treated unfairly in American security reviews of proposed corporate acquisitions, even though nearly all deals are approved unchanged.

"China hopes the United States will treat Chinese companies equally and ease restriction on foreign investment and export of high-tech products to China," said Song Lifan, an economist at Renmin University in Beijing.

A possible measure of progress will be whether Beijing offers "meaningful concessions" on technology, said Hirson, Wright and Triolo of Eurasia Group.

Without that, hardliners in Washington "will urge Trump to resume escalation," they said. He is too committed to confronting Beijing over technology "to easily back away from those issues."

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