The tariffs imposed by the US on imports from China could remain in place even after the two countries sign a comprehensive trade agreement, President Donald Trump said today.
"We are not talking about removing (tariffs), we are talking about leaving them for a substantial period of time," Trump told reporters at the White House today. "We have to make sure that if we do a deal with China, China lives by the deal. Because they had a lot of problems living by the previous deals."
Trump's remarks appear to drive a harder bargain for a potential deal to end the ongoing trade war than what US officials have suggested they would seek. US trade representative Robert Lighthizer has told members of Congress the terms of the agreement would include lifting the tariffs in exchange for extensive changes in China's trade policies, with the possibility of reimposing tariffs later if Washington believes its concerns are not addressed.
Trump is proposing a different sequence, keeping the tariffs in place unless China is shown to adhere to its end of the trade deal.
The terms of the agreement outlined by Lighthizer would include an inspection mechanism to ensure Beijing's compliance on the so-called "structural issues" — protecting intellectual property, ending forced technology transfer and lifting restrictions on US companies' participation in banking and other sectors. The US administration holds that the large US trade deficit with China — $419bn last year — reflects Beijing's protectionist measures that it is working to overturn.
The enforcement mechanism will include monthly meetings between the US Trade Representative's (USTR) office and the Chinese Commerce Ministry, quarterly meetings at the deputy ministerial level, and a semi-annual meeting between Lighthizer and his Chinese counterpart to review complaints from companies.
While public remarks by Trump and his senior Cabinet members in recent weeks provide an outline of what Washington expects, Beijing's position is less clear. Both sides insist that negotiations are going well and making progress, even though the timeline for a meeting between Trump and Chinese president Xi Jinping that was expected to seal the deal is starting to slide.
Chinese market participants expect the US to lift all tariffs imposed last year once the agreement is signed, paving the way for Beijing to lift the retaliatory taxes on imports of energy, agricultural and other commodities from the US. The trade war cut off China's imports of crude and LNG from the US for most of the second half of 2018.
Trump last month he wanted a "grand deal" covering all bilateral issues — preferably agreed to in a one-on-one session with Xi. A meeting between the two leaders was tentatively scheduled to take place this month at Trump's Mar-a-Lago property in Florida. But it is delayed until April, US officials said. Lighthizer and treasury secretary Steven Mnuchin are expected to travel to Beijing next week to continue negotiations. Lighthizer last week said the two sides remain apart on major issues.
The bargain offered by the US may be a hard one for Beijing to accept, especially the enforcement mechanism. Beijing has offered to buy more US energy and agricultural products, in addition to addressing structural issues. Chinese negotiators likely would prefer to finalize terms of the agreement before committing to Xi's meeting with Trump.
Existing US tariffs affect about half of the $539bn/yr in imports from China, including many chemical and industrial products. USTR has indefinitely postponed a further escalation in tariffs. Reciprocal tariffs imposed by Beijing cover 90pc of the $120bn/yr of China's imports from the US, including most energy commodities.
"We have our representatives going there this weekend to further the deal. We are taking in billions and billions of dollars in tariff money, and for a period of time that will stay," Trump said.
"Recent consultations between the economic and trade teams of China and the US have made substantial progress," the Chinese foreign ministry said. "We believe the two teams will follow the instructions of the two heads of state and reach a mutually beneficial and win-win agreement on the basis of mutual respect."
