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Trump suspends new tariff increase on Chinese goods by two weeks ‘as a gesture of goodwill’

United States (US) President, Donald Trump said on Twitter on Wednesday night that he would delay by two weeks the next increase in tariffs on Chinese goods as a “gesture of good will” to advance trade talks that have made little progress for months.

Trump China
Trump (left) and Xi Jinping (Right)

The president acted several hours after a conciliatory Chinese move to grant 16 U.S. products a one-year exemption from Beijing’s retaliatory tariffs. In a pair of tweets, Trump said he delayed his scheduled Oct. 1 increase at the request of China’s chief trade negotiator, Vice Premier Liu He, to avoid imposing the tariffs as the People’s Republic of China celebrated its 70th anniversary.

Oct. 1 is a politically sensitive date on the Chinese calendar in any year, but President Xi Jinping has been preparing for an elaborate celebration this year to showcase the country’s emergence as a global power. Liu is expected to lead a Chinese delegation to Washington for the resumption of the stalled trade talks sometime next month, Washington Post reported.

“This is a response to the Chinese goodwill gesture,” said Michael Pillsbury of the Hudson Institute, who has advised the administration on China. “This is goodwill gesture for a goodwill gesture.”

Still, US-China relations remain fraught. On Sept. 1, the United States imposed a 15 per cent tariff on an additional $112 billion of Chinese goods, the first step toward taxing almost all Chinese imports by mid-December. And for now, the next increase has only been delayed not canceled. On Oct. 15, the United States now plans to raise to 30 per cent from 25 per cent its import levy on $250 billion worth of Chinese products.

According to the Washington Post report, business groups remain wary of the trade war’s dangers. “It’s a nice gesture to see the delay in tariffs given significance of October 1st to China but we remain focused on the upcoming high-level talks in early October and desire for signs that the talks will be productive,” Myron Brilliant, executive vice president of the U.S. Chamber of Commerce, who was visiting Beijing, said via email.

Some experts were harshly critical of the administration for originally planning the tariff increase for a date of such symbolic importance to the Chinese. “That was a provocative insult to the Chinese side,” said Susan Shirk, a former U.S. diplomat in the Clinton administration and now head of the 21st Century China Center at the University of California at San Diego. “This reflects the fact that the administration is basically incompetent when it comes to actually getting things done, negotiating and really inducing China to make the changes we seek.”

Mid-level U.S. and Chinese officials have begun discussing the next round of ministerial talks between Liu and Robert E. Lighthizer, the chief U.S. trade representative, which are scheduled for October. No date has yet been agreed and the two sides remain divided on numerous key issues.

The president has been seeking a comprehensive trade deal involving huge new Chinese purchases of American industrial and agricultural goods as well as structural changes in China’s state-directed economic model.

“The brevity of the delay is clearly intended to signal that the Trump administration has no intention of easing the tariff pressures unless China is willing to make significant concessions in the upcoming talks,” Eswar Prasad, former head of the International Monetary Fund’s China division, said via email.“

This modest concession from Trump could give the Chinese government a bit of domestic manoeuvring room in the next round of negotiations. But the path to any sort of deal is still strewn with many major obstacles and this concession by Trump doesn’t change the fundamentally unfavourable dynamics of the trade talks.”

China’s act to exempt certain products earlier Wednesday, which Beijing said was designed to ease the dispute’s impact on American companies, does not offer relief from tariffs on the big-ticket agricultural products such as soybeans and corn that are causing the most hurt in the United States.

“China wants to claim the moral high ground before the October talks and to send a message of goodwill,” said Yao Xinchao, professor of international trade at the University of International Business and Economics in Beijing. “It’s all about moulding public opinion” to portray the United States as the aggressor, Yao added.

China’s Ministry of Finance said that 16 types of U.S. products would be exempt from retaliatory tariffs for a year from Tuesday. The list included varieties of animal feed such as alfalfa and fish meal, cancer drugs gefitinib and capecitabine, base oil for lubricants and lubricating grease, and some farm chemicals.

Further exemptions will be announced in the coming weeks, the ministry said, and tariffs that have been imposed will be refunded.

“The purpose is to minimize the impact of economic and trade frictions on Chinese enterprises, and to show China’s consistent calmness and rationality in dealing with these frictions,” the state news agency, Xinhua, wrote in a commentary published Wednesday evening. It characterized China as “highly responsible.”

But the list offers no respite for American farmers affected by Chinese tariffs on products including corn, soybeans and pork. Exports of American agricultural products have been hit especially hard in the trade war — the Chinese duty on American pork now sits at 72 per cent — leading the Trump administration to offer compensation to American farmers to the tune of $28 billion.

China knows that this represents a point of leverage: The trade war is playing out in rural America ahead of an election year.

“Pork and soybeans are two important bargaining chips that China won’t play easily,” Yao said.

Vanguard.

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