January 21, 2019

Canadian-Chinese Trade Talks “Dead” While U.S. Discussions Advance

In briefings last week with members of Parliament, Canada’s ambassador to China, John McCallum, said efforts between his country and China to reach a trade deal are “dead” as his government tries to negotiate the release of two Canadians who are currently being held in China. McCallum told reporters, “We are certainly not negotiating free trade with China either before or after this. So it’s not on the table right now.”

The United States and China, meanwhile, now have about five weeks left to reach a trade deal before the U.S. government implements additional tariffs on billions of dollars in Chinese products. While he wouldn’t “predict the outcome,” White House economic adviser Larry Kudlow said last week that trade talks with China are “going well.” Indeed, last Friday the Chinese government agreed to increase purchases of U.S. goods in an effort to reduce its trade deficit with the United States to zero by 2024. The United States also reportedly wants “regular reviews of China’s progress on pledged trade reforms as a condition for a trade deal,” and the ability to impose new tariffs if China were to violate the new agreement.

U.S. Treasury Secretary Steve Mnuchin said if China agrees to the United States’ demands, President Donald Trump could consider “lifting some or all” tariffs on China.

Chinese Commerce Vice Minister Wang Shouwen and Finance Vice Minister Liao Min will be in Washington, D.C. this week to continue negotiations while Vice Premier Liu He will travel to the United States Jan. 30-31.

While the two sides are working toward a deal, U.S. Trade Representative Robert Lighthizer promised in a letter sent last week to lawmakers that if the Trump administration goes ahead with additional tariffs on Chinese products, it will establish an exclusion process for those penalties.

The ongoing partial U.S. government shutdown could impact negotiations with China. The majority of staff at the U.S. Commerce and Treasury departments have been furloughed as have about 75 percent of the Office of the U.S. Trade Representative’s 265 full-time staff members. The shutdown, if it continues, also could impact trade deal negotiations with Japan and the European Union.