March 18, 2019

Slow Progress On U.S.-China Trade Deal

While the White House signaled last week that President Donald Trump probably will not meet with Chinese President Xi Jinping this month as expected, it appears progress is still being made on a possible trade deal between the two countries.

Last Friday, Politico Pro (subscription required) reported that China “has tentatively agreed to an enforcement mechanism in trade talks with the United States in which it would not retaliate against certain tariffs the U.S. would be cleared to impose if Beijing were to violate terms of a larger agreement.” According to National Economic Council Director Larry Kudlow, the United States proposed a comprehensive mechanism in which complaints of violations would first move through three layers of review within the federal government. After that, and if the United States designated that China is not in compliance, U.S. officials would impose tariffs on China “in a proportionate way.” China, Kudlow said, has agreed in principle to that agreement. (Calling the approach “clever,” Kudlow did note that the deal needs “final sign-off.”)

While Kudlow was very optimistic about a future trade deal, U.S. Trade Representative Robert Lighthizer cautioned last week that “major issues” are still unresolved, with “few signs” of breakthroughs on difficult subjects like treatment of intellectual property. In a hearing before the U.S. Senate Finance Committee last week Ambassador Lighthizer also discussed the importance of the enforceability of a deal. He said, “We have to maintain the right to be able to – whatever happens to the current tariffs – to raise tariffs in situations where there’s violations of the agreement … If we don’t do that, then none of it makes any difference.”

Top Trump administration officials said President Trump and President Xi may meet in April.