U.S. hopes to re-launch China trade talks, will not accept conditions on tariffs

WASHINGTON (Reuters) – The United States hopes to re-launch trade talks with China after President Donald Trump and President Xi Jinping meet in Japan on Saturday but Washington will not accept any conditions on tariffs, a senior administration official said on Tuesday.

The two sides could agree not to impose new tariffs as a goodwill gesture to get negotiations going, the official said, but it was unclear if that would happen.

The United States was not willing to come to the Xi meeting with concessions, said the official, who spoke on the condition of anonymity.

The remarks set up what could prove to be a tricky meeting between Trump and Xi, who will sit down together at the Group of 20 summit meeting in Osaka, the first time they have done so since trade talks between the world’s two largest economies broke down in May.

Chinese Vice Premier Liu He, who has led trade talks for Beijing, spoke on the phone with his counterparts, U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin on Monday, according to China’s Ministry of Commerce. The three men are helping to pave the way for talks between the leaders later this week.

Expectations for that meeting so far appear to be low, with the best-case scenario a resumption of official talks that could ease fears in financial markets that the already long trade dispute would continue indefinitely.

China said on Monday that both sides should make compromises in the trade talks and that a trade deal has to be beneficial for both countries.

Trump advisers have said no broad trade deal is expected to be made at the meeting but they hope to create a path forward for talks. Once negotiations resume, they could take months or even years to complete, the senior Trump administration official said.

Washington has imposed 25% tariffs on $250 billion of Chinese goods, ranging from semi-conductors to furniture, that are imported to the United States, as part of the trade war.

Trump has threatened to put tariffs on $325 billion more of goods, covering nearly all the remaining Chinese imports into the United States, including consumer products such as cellphones, computers and clothing.

A resumption of negotiations could put that threat on hold, at least for now. But neither side has shown a great appetite for changing positions, despite a willingness to meet.

“I think if they go with the tariffs, the trade talks are dead. Period,” said one person familiar with the talks.

The United States has made clear it wants China to go back to the position it held in a draft trade agreement that was nearly completed before Beijing balked at some of its terms, particularly requirements to change its laws on some issues.

Beijing wants the United States to lift tariffs, while Washington wants China to change a series of practices including on intellectual property and requirements that U.S. companies share their technology with Chinese companies in order to do business there.

Taoran Notes, an influential account on Chinese messaging app WeChat published by China’s Economic Daily, said in a post late on Tuesday that “certain people” in the United States did not understand China’s determination to uphold its position, and had “illusions” about forcing China to submit. 

“If the US side doesn’t change its thinking, doesn’t change its methods, then all that will happen on the China-U.S. trade issue is that an ‘exchange of views and maintenance of communication’ will persist, and there won’t be more substantive progress,” the author wrote.

PRESSURE BUILDING

The president has spoken optimistically about the chances of a deal. The administration official said rounds of meetings between top trade officials from both countries likely would begin again after the G20 summit.

He noted that although the vice premier still led China’s trade delegation, new names had been added to the list who could be hard-liners.

The official said Trump and Xi were unlikely to get into the fine details of the draft trade pact, although the case of Chinese tech giant Huawei Technologies Co may come up during talks.

Pressure on Huawei, which the U.S. government has labeled a security threat, has increased in recent days.

About a dozen rural U.S. telecom carriers that depend on Huawei for network gear are in discussions with its biggest rivals, Ericsson and Nokia, to replace their Chinese equipment, sources familiar with the matter said.

And the U.S.-based research arm of Huawei – Futurewei Technologies Inc – has moved to separate its operations from its corporate parent since the U.S government in May put Huawei on a trade blacklist, according to two people familiar with the matter.

Trump has indicated a willingness to include the Huawei issue in a trade deal, despite the national security implications cited by his advisers about the company.

Meanwhile, U.S. parcel delivery firm FedEx Corp on Monday sued the U.S. government, saying it should not be held liable if it inadvertently shipped products that violated a Trump administration ban on exports to some Chinese companies.

FedEx reignited Chinese ire over its business practices when a package containing a Huawei phone sent to the United States was returned last week to its sender in Britain, in what FedEx said was an “operational error.”