- The Washington Times
Sunday, January 6, 2019

President Trump said Sunday that weakness in China’s economy could spur a trade deal, as U.S. and Chinese negotiators in Beijing held new talks under rising pressure to end the tariff war that is hurting both nations’ economies and roiling financial markets.

Mr. Trump flew to Camp David for discussions with top aides on a wide range of issues, including how to move beyond the 90-day truce on tariffs that he reached with Chinese President Xi Jinping. He said the slumping Chinese economy is giving Beijing a reason to work toward a deal.

“Their economy’s not doing well,” Mr. Trump told reporters at the White House. “I think that gives them a great incentive to negotiate. I think China wants to get it resolved. I think that things are going to happen. The China talks are going very well.”

Beijing on Friday cut bank-reserve requirements amid slowing growth at home and pressure from the U.S. tariffs.

The president also is likely to hold talks with Chinese Vice President Wang Qishan at the World Economic Forum later this month in Davos, Switzerland, reported The South China Morning Post.

Trump administration officials were to begin two days of trade talks in China early Monday, Beijing time. It’s their first face-to-face meeting since the two leaders agreed at a Group of 20 summit in Argentina last month not to impose new tariffs that were due to take effect Jan. 1.

Deputy U.S. Trade Representative Jeffrey Gerrish is leading the American delegation, which includes the top U.S. trade negotiator on agricultural issues, Gregg Doud; Treasury Undersecretary for International Affairs David Malpass; Commerce Undersecretary for International Trade Gilbert Kaplan; Agriculture Department Undersecretary for Trade and Foreign Affairs Ted McKinney; the Energy Department’s assistant secretary for fossil energy, Steven Winberg; and other senior officials.

White House economic adviser Larry Kudlow said the talks will cover “the whole story,” including commodities, agriculture and industrial capital goods.

Mr. Trump has said talks are progressing well, but it remains unclear whether Beijing will yield to U.S. demands on open markets, technology transfer and industrial subsidies. Meeting some of those demands would require difficult structural reform in China.

China is not doing well now, and it puts us in a very strong position,” Mr. Trump said Friday, as the Labor Department reported stronger-than-expected creation of 312,000 jobs in December. “We are doing very well. I think we will make a deal with China. I really think they want to. I think they sort of have to.”

Washington has imposed punitive tariffs of up to 25 percent on $250 billion of Chinese goods. Beijing responded by imposing penalties on $110 billion of American goods, slowing down customs clearance for U.S. companies, and suspending issuance of licenses in finance and other industries.

Trade tensions have contributed to a steep decline in the stock market since September. China’s economy has slowed, and some U.S. economic sectors are hurting from the tariffs. Mr. Trump has said the tariffs are bringing in billions to the Treasury, but economists point out that U.S. consumers and companies are paying for the levies in the form of higher prices.

The New York Federal Reserve Bank said in an analysis Friday that “higher import tariffs had immediate impacts on U.S. domestic prices,” raising the consumer and producer prices by 0.3 percentage points higher than they would otherwise have been.

Freedom Partners Executive Vice President Nathan Nascimento said the solution “does not have to be difficult.”

“The U.S. and China should lower trade barriers, end the unproductive tariff war and avoid ‘managed trade’ requirements that micromanage who buys what,” said Mr. Nascimento, whose free-trade group is allied with industrialist Charles Koch. “If China really wants to open markets, it should end problematic practices such as forced technology transfers and [intellectual property] theft. The economy needs certainty. Instead, the tariffs and continued uncertainty over the trade war have increased costs for those who can afford it least, and harmed American companies, farmers, and workers along the way.”

The decision to hold this week’s talks at a deputy minister level reflects the need to work out technical details before higher-level officials make “hard political decisions on major issues,” said Tu Xinquan, director of the China Institute for World Trade Organization Studies at the University of International Business and Economics in Beijing.

Chinese officials are unhappy with U.S. curbs on exports of “dual use” technology with possible military applications. They complain China’s companies are treated unfairly in national security reviews of proposed corporate acquisitions, though almost all deals are approved unchanged.

Chinese exports to the U.S. held up through late 2018 despite Mr. Trump’s tariffs. But that was due partly to exporters rushing to beat new duties — a trend that is fading.

The investment bank UBS said 37 percent of 200 manufacturers surveyed said they have shifted out of China over the past 12 months. It said the threat of higher U.S. tariffs was the “dominating factor” for nearly half, while others moved due to higher costs or tighter environmental regulation.

Another 33 percent of companies said they plan to move out of China in the next six to 12 months, according to the UBS report.

Despite the December truce, “most firms expect trade war to escalate,” the report said. Chinese data last week showed its manufacturing activity contracted for the first time in more than two years.

• This article is based in part on wire service reports.

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