US sets China trade deal terms, sources say, but Beijing mum

Reuters . Washington/ Beijing | Published at 12:00am on December 14, 2019

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A file photo shows Chinese and US flags fluttering near The Bund, before US trade delegation met their Chinese counterparts for talks in Shanghai, China. — Reuters photo

Washington has set its terms for a trade deal with China, offering to suspend some tariffs on Chinese goods and cut others in exchange for Beijing’s buying more American farm goods, US sources said on Thursday.

Beijing’s silence, however, raised questions over whether the two sides can agree a truce in their trade war before a new round of tit-for-tat tariffs takes effect on Sunday.

A source briefed on the status of bilateral negotiations said the United States would suspend tariffs on $160 billion in Chinese goods expected to go into effect on Sunday and roll back existing tariffs.

In return, Beijing would agree to buy $50 billion in US agricultural goods in 2020, double what it bought in 2017, before the trade conflict began, two US-based sources briefed on the talks said.

China’s yuan jumped to a four-and-a-half-month high against the US dollar and Chinese shares rallied on Friday on hopes the two sides will avoid further escalation of the trade war. Neither Washington nor Beijing made official statements about a deal, however, raising questions about whether the terms had been agreed by both sides.

New Chinese tariffs on US goods are due to take effect at 04:01 GMT Sunday and new US tariffs on Chinese goods will apply at 05:01 GMT. Both would need to make formal announcements to postpone or cancel the tariffs.

Washington had offered to cut existing tariffs on Chinese goods by as much as 50 per cent and suspend the new tariffs scheduled for Sunday to secure phase one of deal first promised in October, two people familiar with the negotiations had said earlier on Thursday.

One of those people told Reuters that US president Donald Trump and his top advisers agreed on the terms for a proposal, possibly a final offer, and were now waiting for Beijing to sign off in writing.

A Beijing-based US business community official also told Reuters he viewed the reported deal more as a ‘final offer’ that has been approved by Trump but not yet affirmed by Beijing.

Chinese foreign ministry spokeswoman Hua Chunying, asked about the status of the trade talks during a daily briefing on Friday, did not comment on whether an agreement has been reached or specific terms of any deal with the United Sates.

‘China is committed to constructive dialogue to resolve and manage our differences, and believe ... the deal must be mutually beneficial,’ she said.

Some analysts doubted China could deliver such a dramatic increase in agricultural purchases. For instance, demand for soya beans — a key US product used for animal feed — is down after African swine fever devastated China’s pig herd. It also made a big increase in corn purchases unlikely, they said.

Ramping up purchases of other US farm products such as beef would be hard, too, they said.

‘There’s just no logistical way that they can double imports in a year,’ said Darin Friedrichs, senior Asia commodity analyst at INTL FCStone.

Senior Chinese diplomat Wang Yi blasted Washington for damaging relations by criticising Beijing over issues such as Hong Kong and the treatment of Muslim Uighurs. He did not mention the trade war.

‘We will never accept the so-called unilateral sanctions and any acts of bullying,’ he during an event on Friday morning.

In the absence of a deal that at the least declares a truce in the 17-month trade war, US tariffs on Chinese imports, including products such as video game consoles and computer monitors, begin Sunday. China’s retaliatory tariffs, targeting goods ranging from corn and wheat to small aircraft and rare earth magnets, will also take effect.

Beijing is also scheduled to begin reapplying on December 15 an additional 25 per cent tariff on US-made vehicles and 5 per cent tariffs on auto parts that had been suspended at the beginning of 2019.

Chinese officials and trade experts have warned that another exchange of tariffs could torpedo the trade negotiations and further escalate the dispute. Some experts say it’s possible that talks may be suspended altogether until after the US presidential election in November 2020.