China and U.S. Signal Harmony on Trade, Despite Broader Tensions
The two countries said on Friday — Thursday night, Washington time — that their top trade and financial officials had held talks via conference call, their first since the coronavirus pandemic ballooned in late January. Although President Trump had suggested this week that the White House would take a skeptical look at whether China was living up to its commitments under the truce, the two countries signaled that their agreement was on track.
“Both sides agreed that good progress is being made on creating the governmental infrastructures necessary to make the agreement a success,” the Office of the United States Trade Representative said in a statement. “They also agreed that in spite of the current global health emergency, both countries fully expect to meet their obligations under the agreement in a timely manner.”
But the world has changed since Mr. Trump launched the trade war in the spring of 2018, disrupting the world’s largest and most important economic relationship.
China is still struggling to recover from its efforts to stamp out the coronavirus, which included shutting vast parts of its industrial machine; its economy shrank for the first time in nearly half a century. The United States is still debating when to end its own lockdowns, which have contributed to the loss of millions of jobs.
It is not clear whether domestic politics will lead to a breakdown of the deal, known as the Phase 1 trade agreement. Other such pacts have quickly fallen apart. But current and former trade officials on both sides of the Pacific have evinced little enthusiasm for a revival of the trade war and predict that the agreement will survive.
“The Phase 1 agreement will set the rules of engagement even after the pandemic has receded,” said Jamieson Greer, who was chief of staff for Robert Lighthizer, the United States trade representative, until a month ago and is now a partner at King and Spalding, a Washington law firm.
The Phase 1 agreement keeps 25 percent tariffs in place on a wide range of imports from China that the Trump administration considers to have strategic or economic value, like cars or nuclear reactor components. It requires China to strengthen intellectual property protection and open its markets to foreign financial services companies.
The agreement also calls for China to increase its imports from the United States by $200 billion this year and next year, compared to levels in 2017, before the trade war began.
The chapter on extra purchases, one of seven chapters in the agreement, mandates specific increases in four categories of China’s imports from the United States: food, manufactured goods, energy and services.
China has increased its imports of American food since the pact was signed. But its overall imports of other American goods have fallen short of the administration’s initial hopes, as the coronavirus pandemic has hurt Chinese consumer spending and investment. China’s total imports from the United States fell 5.6 percent in the first four months of this year compared to the same period last year, according to China’s trade data.
On Wednesday, Mr. Trump said during a White House briefing that he would review by the end of next week whether China was complying with the Phase 1 trade pact. The comments came amid charged rhetoric between the two countries over the coronavirus, with the Trump administration having increasingly blamed Beijing for downplaying the severity of the initial outbreak in the city of Wuhan.
But even during that briefing, Mr. Trump talked about trade with China only when asked specifically about it. He said twice that he did not want to talk about any new tariffs.
Experts in China, meanwhile, said Beijing would live up to its commitments, despite a pandemic that negotiators could not have anticipated when the truce was reached in mid-January.
“China sticks to the Phase 1 agreement,” said He Weiwen, a prominent Chinese trade expert and former Commerce Ministry official.
Against that backdrop, the statements released by both governments after the call — which included Mr. Lighthizer, Vice Premier Liu He and Treasury Secretary Steven T. Mnuchin — were noticeably upbeat.
“The two sides stated that they should strengthen macroeconomic and public health cooperation, strive to create a favorable atmosphere and conditions for the implementation of the first phase of the Sino-U.S. economic and trade agreement, and promote positive results,” China’s Ministry of Commerce said.
Doubts about the U.S.-China relationship have weighed on stock markets in recent days. Mr. Trump has long perceived the stock market as a barometer of his political success, and trade flaps with China have tended to depress share prices. Asian markets on Friday, already buoyed by a strong showing on Wall Street the day before, rose further after news of the talks emerged.
But neither of those truces was a comprehensive pact or met more than a few of the Trump administration’s goals, as the Phase 1 agreement appears to do.
A resumption of the trade war would be bitterly opposed by many businesses in the United States. They dislike paying tariffs and have lobbied hard for their removal. Business lobbyists contend that, like other taxes on businesses, the cost of the tariffs is eventually passed along to consumers.
Still, with the Chinese economy in the doldrums, China will be hard-pressed to increase its purchases of American goods, which could put pressure on Mr. Trump to act.
Mr. He, the former Commerce Ministry official, said that a nose-dive in world oil prices, together with falling Chinese energy usage as the country’s economy slows, would make it hard for China to meet the targets in the Phase 1 accord for energy imports from the United States. The accord specified that China would pay market prices for its imports, meaning it would now have to buy a lot more to meet targets at a time when it does not have much need for more fuel.
“There is a phenomenal decrease in the demand,” Mr. He said.