China and US hail trade truce but key obstacles remain
White House to delay planned increase of US tariffs on Chinese goods, while China pledges to take in more US imports
Buenos Aires — US President Donald Trump and Chinese President Xi Jinping both got something out of hitting pause on a trade war that threatens both of their economies, but analysts said that the tenuous truce does little to deal with the core sticking points of their economic rivalry.
The White House said it will postpone a planned increase of US tariffs on Chinese goods for 90 days, while China pledged to take in more US imports.
The steps temporarily pause an escalating confrontation between the world’s two largest economies that has rattled world markets.
Trump launched the bitter row earlier in 2018 by implementing tariffs on billions of dollars in goods from China, which he accuses of market barriers and predatory practices that Washington says make fair trade impossible. The tariffs prompted tit-for-tat responses from Beijing.
After months of sabre-rattling, however, Trump praised an “amazing and productive” meeting with Xi at the Group of 20 on Saturday, and Chinese state mouthpiece Xinhua news agency said the outcome in Buenos Aires “needs to be cherished”.
“This is good news for both countries, and a relief for the international community,” Xinhua said.
The pause allows Xi to stave off an escalation of the pressure that higher tariffs would place on his country’s slowing economy.
At the same time, Trump — stung by the US Democrats’ congressional win in midterm elections — can avoid further pain for agricultural US states whose exports of key crops such as soya beans to China have been hit, said Beijing-based political consultant Hua Po.
“This was a rare opportunity for China because [the midterms] made Trump a lame president. So at this time, it was acceptable for China to maintain some bottom lines while making concessions,” Hua said.
But analysts said the two sides remain miles apart on key issues.
Trump may come under pressure once scrutiny of the ceasefire reveals that Xi got off “without yielding any meaningful concessions”, said Brock Silvers, MD of Shanghai-based investment advisory Kaiyuan Capital.
“The tensions have only been delayed, not resolved, and unless China quickly finds the political will to make a long-term peace via significant concessions on technology issues, this week’s expected gains may prove to be temporary,” he said.
Indeed, the truce is only partial.
About $50bn worth of Chinese imports already face 25% tariffs.
And while existing 10% tariffs targeting an enormous $200bn in goods won’t rise to 25% on January 1, as threatened by Trump, they will still remain in effect.
China has targeted $110bn worth of US imports for tariffs.
Trump has warned he could slap punitive duties on the remaining $267bn in Chinese goods coming to the US.
ANZ Research noted that there are “stark differences” in the public announcements by the two sides.
The Chinese side, unlike the US, made no mention of the fact that the postponement of the tariff increase lasts only 90 days, and that they could be raised if upcoming trade talks don’t go well.
“We are unsure how serious the US administration is about the ‘ceasefire’ declaration,” ANZ Research said.
“The US has not promised it will not escalate the scale and coverage of the tariff measures thereafter.”
It noted also that China did not mention US calls for deep structural changes in its economic policies.
“These are deeply seated issues which are difficult to resolve soon,” ANZ Research said.
Western businesses routinely say that Beijing’s reform promises are not worth the paper they are printed on, accusing China’s government of perpetually delaying substantive reforms or actively backsliding.
Kenneth Jarrett, president of the American Chamber of Commerce in Shanghai, called the news out of Argentina “positive and encouraging”.
But he added: “We hope today’s positive news becomes something more permanent. For that to happen, the Chinese government must address the long-standing concerns of the American business community.”
He cited “market access restrictions, weak intellectual property rights protection, unfair industrial policies, the slow pace of economic reforms and lack of regulatory transparency”.
One of the biggest irritants in the US-China relationship is Xi’s stated plan to develop Chinese hi-tech prowess to a level rivalling the US.
Trump has hit back at this so-called “China 2025” plan as a threat, accusing Beijing of stealing US technology.
Crucially, the trade truce makes no mention of China’s tech ambitions.
“Trump knew that if he insisted on China giving up the 2025 plan, it would mean the breakdown of Sino-US trade negotiations,” Beijing-based consultant Hua said.