Seeking to avert higher tariffs, China dispatches top negotiator to U.S.

WASHINGTON/BEIJING (Reuters) – Chinese Vice Premier Liu He will travel to Washington for two days of trade talks this week, China said on Tuesday, setting up a last-ditch bid for a deal that would avoid a sharp increase in tariffs on Chinese goods ordered by U.S. President Donald Trump.

U.S. officials have accused China of reneging in the past week on substantial commitments made during months of negotiations aimed at ending their trade war, prompting Trump to issue a new deadline to raise tariffs on $200 billion worth of Chinese goods to 25 percent from 10 percent.

The higher tariffs are scheduled to take effect at 12:01 a.m. EDT (0401 GMT) on Friday, a spokesman for the U.S. Trade Representative’s office said. That comes right in the middle of Liu’s visit.

China’s Commerce Ministry said that Liu, who leads the talks for Beijing, will spend only two days in Washington – Thursday and Friday – instead of the three days he had previously planned before Trump announced the tariff increase.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Monday cast doubt on the talks, telling reporters China had backtracked on previous commitments.

The gloomier tone shook Wall Street, causing major stock indexes to tumble more than 1 percent. Treasury yields and oil prices also fell as the potential for an unraveling of the trade talks sparked fresh concerns about global economic growth.

During a 10-month U.S.-China war, U.S. tariffs have been imposed on $250 billion worth of Chinese goods, and retaliatory Chinese tariffs slapped on $110 billion worth of American products. Trump has pushed for sweeping changes to China’s policies on intellectual property theft, technology transfers industrial subsidies and market access.

Trump has criticized the U.S. trade deficit with China, which hit a record $419 billion in 2018, as stealing American manufacturing jobs. His hard line on China has played well with his political base in Midwestern industrial and farm states, with Trump seeking re-election next year.

Trump had initially set the tariff increase to 25 percent on $200 billion worth of Chinese goods, including internet modems and routers, printed circuit boards, vacuum cleaners and furniture, in January. He delayed the deadline until March 1 to allow negotiations, and then postponed the increase indefinitely, citing progress in the talks.

CHINESE LAWS

A person with knowledge of the talks told Reuters that Chinese negotiators sought to reverse earlier agreements to make changes to Chinese laws to reflect policy changes on a “comprehensive” range of issues. It would be difficult to overcome this setback and reach agreement on other sticking points, such as subsidies and cloud-computing access, in just two days of talks, the person said.

Wendy Cutler, a former USTR chief negotiator for Asia, said it was normal to see drama in the final stages of a major trade negotiation, but indications of Chinese backtracking on previously agreed text were cause for concern.

“That signals a deep lack of trust between the negotiating teams, which can be hard to rebuild,” said Cutler, now managing director of the Asia Society Policy Institute in Washington.

“It all now hinges upon what Liu He is bringing with him to Washington,” Cutler added. “If he can convince Lighthizer that China will honor commitments made during previous rounds then things presumably can get back on track so to the remaining sticking points can be addressed.”

China’s response to the prospect of new tariffs has been reserved. Foreign Ministry spokesman Geng Shuang said in a press briefing on Tuesday that mutual respect was the basis for reaching a trade agreement.

“Adding tariffs can’t resolve any problem,” Geng said.

“Talks are by their nature a process of discussion. It’s normal for both sides to have differences. China won’t shun problems and is sincere about continuing talks,” Geng said.

China has repeatedly said it will make changes to open its economy on its own timeline, not in response to trade disputes.

But recently it has adopted new laws, including a foreign investment law, and amended others, moves some see as efforts to tackle the concerns of the United States and other foreign investors, including those from China’s largest trading partner, the European Union.

The United States now has 25 percent tariffs on $50 billion of Chinese machinery and technology goods, and 10 percent tariffs on $200 billion of products ranging from computer modems and routers to furniture, lighting and building materials.

Negotiations to remove U.S. tariffs have been one of the remaining sticking points. China wants the tariffs removed. U.S. officials want to keep some, if not all, as part of any final deal to ensure China lives up to its commitments.