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China Aiming For Limited Trade Deal Including Billions In Farm Purchases Despite Recent Escalations: Reports

It's hard to see how Trump would sell a limited arrangement as anything other than a campaign tactic.

China is prepared to swallow the latest escalations from the Trump administration in what is now a multi-faceted bilateral dispute in the interest of securing a limited trade deal.

According to a source with direct knowledge of the discussions, Vice Premier Liu He is prepared to accept a limited agreement on the condition that no further tariffs go into effect.

That would presumably include the escalation currently scheduled for October 15, when the tariff rate on $250 billion in Chinese goods is set to ratchet higher from 25% to 30%. 15% levies on some $160 billion in Chinese products are currently scheduled for mid-December. Many of those products are consumer goods.

In keeping with recent news flow, China is seemingly not prepared to offer broad concessions on any of the core issues that have prevented the two sides from making meaningful progress on a sweeping agreement. Rather, Beijing would again offer to buy US agricultural products.

Earlier this week, Fox cited the Chinese commerce ministry in reporting that Beijing is open to an interim deal, but will not change the country’s laws on intellectual property.

On Sunday, reports indicated China has narrowed the scope of any potential deal, taking concessions on state subsidies off the table.

Read more: China Totally Prepared To Give Up Nothing In Exchange For Tariff Relief, Commerce Ministry Suggests

Still, Beijing is said to be ready to de-escalate. “President Xi’s government is under pressure to stem the broadening conflict as the trade war adds to the downward forces on China’s slowing economy”, Bloomberg writes on Wednesday. “At the same time China has resisted changes to its own industrial and economic policies that could potentially weaken the Communist Party’s grip on the economy”.

Meanwhile, FT reports that Chinese officials have offered (or are set to offer) to increase purchases of US farm goods by $10 billion per year as part of an interim deal. Liu He, FT says, is coming to the table with “real” proposals.

All of this points in the direction of the kind of “limited”, “interim” agreement media reports suggested was in the cards last month during working-level discussions aimed at setting the table for this week’s high-level pow wow. Trump initially expressed an openness to such a deal, but has recently hardened his rhetoric.

At this juncture, all proposed and/or threatened tariffs have nearly gone into effect – no tariffs have ever been removed.

(Goldman)

The latest incremental information on the forthcoming principal-level talks in Washington comes after the US blacklisted more than a half-dozen tech companies (not to mention a hodgepodge of other entities) and instituted a new travel ban on officials accused of participating in human rights abuses in Xinjiang.

It’s possible the Chinese think Trump needs talking points for voters amid the spiraling impeachment probe and might be amenable to an interim agreement that allows him to boast about “many billions” of farm good purchases.

Last month’s University of Michigan sentiment survey showed Americans are now attune to the tariffs again – and that is most assuredly not a good thing. Tariff escalations have led to volatility in US equities in 2019, and May’s rout would have likely extended into June had it not been for the market ramping up expectations for Fed cuts as the trade war escalated and Trump briefly threatened to slap across-the-board tariffs on Mexico.

As far as an interim deal goes, White House hardliners have always insisted that any agreement which doesn’t address structural sticking points like IP theft and industrial policies is no agreement at all.

It’s hard to see how Trump would sell a limited arrangement as anything other than a campaign tactic, although markets will take whatever they can get as this charade drags into its second year with no end in sight.


 

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3 comments on “China Aiming For Limited Trade Deal Including Billions In Farm Purchases Despite Recent Escalations: Reports

  1. I believe this about as much as I do Trump tweets. Pretty sure this is just market manipulation (on both sides). It’s a sad day when North Korea has greater credulity than the US administration.

  2. vicissitude

    The pointlessness of the art of the deal is to wear people down and then go into bankruptcy and then strut around like a squirrel on LSD, who magically draws idiots into the super powerful trancing waves of the (authoritarian) Daddy Magnet. Pulse away micro dick ..

    Also see: When a wolf actually does appear and the boy again calls for help, the villagers believe that it is another false alarm and the sheep are eaten by the wolf. In later English-language poetic versions of the fable, the wolf also eats the boy.

  3. I think Xi is playing his cards so that if America is smart enough to not give md a second term the Democrats will see him as someone they can at least talk to.

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