Welcome to Weise Wednesday! Twice a month we will share a brief Q&A with the former U.S. Commissioner of Customs, Mr. George Weise. If you have questions, we encourage you to send them to This email address is being protected from spambots. You need JavaScript enabled to view it..

 

Q. What are the prospects for the United States and China to resolve their trade dispute by the March 2 deadline?

A. As I recently discussed, the outstanding trade dispute between the U.S. and China appeared to be at a complete standstill until a 90-day truce was agreed upon between President Trump and Chinese President Xi Jinping while both parties were in Buenos Aires for the Group 20 Summit. Under the agreement they reached, President Trump decided to postpone for 90 days the planned January 1 tariff increase on Chinese products in return for a Chinese commitment to purchase a significant amount of U.S. farm, energy, and industrial goods. The parties also agreed to immediately begin talks on Chinese industrial policies, including coercive licensing of U.S. technology, trade secret theft, and non-tariff barriers.

 

How have the trade talks progressed so far?

Talks between the two sides commenced on January 7 in Beijing. While limited progress was made during the three days of discussions, they agreed to continue the talks in Washington, which took place January 30-31. The Chinese delegation was led by Liu He, China’s Vice Premier, while the U.S. side was led by U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steve Mnuchin. 

On January 31, President Trump hosted the Chinese delegation at the White House and expressed optimism that a trade deal could be reached before the March 2 deadline. He also announced that he would be meeting next month with Chinese President Xi Jinping in an effort to close the deal. During the White House meeting, Vice Premier He informed the President that China is committed to purchasing five million tons of U.S. soybeans.

But despite the President’s optimism and the Chinese apparent willingness to take steps to address the large bilateral trade surplus with the U.S., the two parties still appear to be far apart on the structural issues being negotiated, such as intellectual property and other trade barriers.

After two days of talks, USTR Lighthizer commented that the two sides have not even agreed to a draft framework of an agreement and did not discuss reducing U.S. tariffs on Chinese goods. On the latter point, President Trump said in an interview that it is possible that some of the additional tariffs on Chinese goods would remain in effect, even if an agreement is reached with China.

 

What are the potential outcomes?

At this time, it seems highly unlikely that a comprehensive agreement addressing all of the fundamental structural issues raised by the U.S. can be reached by March 2, when additional tariffs on Chinese goods are scheduled to go into effect. It is possible that the March 2 deadline could be extended, but President Trump has stated clearly that the additional tariffs on Chinese goods would be effective on that date.

Some have speculated that a smaller deal can be reached by March 2, which would delay the additional tariffs, but would not roll back the duties on $250 billion worth of Chinese imports the U.S. has already imposed. In exchange, China would make significant commitments on the purchase of U.S. soybeans and other American goods and services. Under such an arrangement, presumably negotiations would continue on the more fundamental structural issues.

At this point, it is impossible to predict what the outcome of these discussions will be. As always, it is critically important that global traders stay tuned and stay engaged.