May 6, 2019

Trump Tweet Throws U.S.-China Negotiations Into Uncertainty

Trade negotiations between the United States and China continued to move in a positive direction again last week, but then took a negative turn over the week.

First, to recap last week: after U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin met on May 1 with China’s Vice Premier Liu He, both sides signaled the discussions are in their ending stages. On social media, Secretary Mnuchin even called last week’s talks “productive.”

Among the issues that still need to be concluded are enforcement mechanisms and a decision about what will happen to the tariffs that the United States already has placed on Chinese products. Progress seems to have been made last week on these issues, however. Poltico’s “Morning Trade” reported the two sides have agreed to an enforcement mechanism similar to what Ambassador Lighthizer has described in the past: a series of meetings at various levels to address complaints if China fails to comply with the agreement. If concerns cannot be resolved via these discussions, the United States would be allowed to move forward unilaterally with new tariffs and China would not be able to retaliate.

Separately, according to Politico Pro subscription required), negotiators reportedly had reached general agreement on a plan for the United States to immediately remove a 10 percent tariff on a portion of the $200 billion worth of Chinese imports if an agreement is signed. The 25 percent tariffs the United States has placed on $50 billion in Chinese goods would stay in place longer, however.

All of these tentative agreements were thrown into question over the weekend, however, when, as Politico explained, President Donald Trump posted on social media threatening to escalate the trade war with China came after U.S. Trade Representative Robert Lighthizer shared frustrations with Trump that Beijing was taking a step back from certain promises in the trade talks, including changing laws concerning the transfer of proprietary technologies from U.S. companies doing business in China.

While China will still send a delegation to Washington this week as planned, it’s unclear if Chinese Vice Premier Liu He will still join. Connecting the Dots will continue to report on these developments each week. Stay tuned.