During last week’s phone call between Bob Lighthizer, Steve Mnuchin and Vice Premier Liu He, the Chinese made a small peace offering to the Trump administration.
According to a pair of people familiar with the call, Liu suggested Beijing may be willing to purchase a “modest amount” of US farm products, contingent upon the US delaying the tariff hike on $250 billion in Chinese goods that’s currently scheduled for October 1. The two sources – who spoke to Politico – also said the Chinese indicated they’d like to see some export restrictions on Huawei lifted.
This new bit of incremental information comes after Larry Kudlow on Friday revealed sparse details of the call, which served as the impetus for a three-day rally on Wall Street that helped US equities erase losses logged in a lackluster, post-holiday session on Tuesday.
“The phone call the night before last with Secretary Mnuchin and Lighthizer and Vice Premier Liu He went very well [and] that’s important”, Kudlow told CNBC.
“I don’t want to predict anything. I’m just saying it is a good thing that they’re coming here, and tempers are calmer now”, he added.
Assuming Politico’s reporting is some semblance of accurate, we have now reached new levels of recursive absurdity.
Beijing is offering to make “modest” agricultural purchases in order to prevent an escalation (i.e., the prospective hike to the tariff rate on the $250 billion in goods which were originally taxed at 10% from September 24, 2018, and at 25% from June) that was itself the product of China’s retaliatory measures announced on August 23 in response to Trump breaking the Osaka truce on August 1 because, according to the White House, Xi didn’t make good on a promise to buy large quantities of the very same farm goods.
Just try to wrap your head around that.
In any event, this does suggest that China will seek some manner of relief from the latest measures imposed and/or threatened by Trump in exchange for any further goodwill gestures.
It also means Liu He is looking first and foremost for ways to avoid tariff hikes.
That, in turn, underscores how far afield the two sides are vis-à-vis the issues that actually matter. Forget focusing on IP theft, forced technology transfer and state subsidies, the Trump administration and Liu are now just wrangling about the possible easing of the most recent tariffs, restrictions and non-tariff barriers, as a precondition for sitting across the table from one another.