Trump appears to raise new doubts about US-China trade deal

Published : 24 May 2018, 15:05

Sahos Desk

President Donald Trump cast doubt Wednesday on the prospects for talks that are designed to head off a trade war between the United States and China.

Four days after the two countries suspended plans to impose tariffs on up to $200 billion of each other's goods, Trump declared in a tweet that a more detailed agreement with China "will be too hard to get done."

The president also predicted Wednesday that automakers and autoworkers would be "very happy" with the outcome of talks to rewrite the North American Free Trade Agreement with Canada and Mexico. He did not elaborate.

On yet another trade front, Trump officials are sparring with key U.S. allies — including Japan and the European Union — over tariffs that the administration imposed on imported steel and aluminum. The EU has so far been exempt from the tariffs, but its reprieve runs out June 1.

Trade tensions between the U.S. and China, in particular, have shaken financial markets and alarmed business executives.

While saying the talks with China were "moving along nicely," Trump said via Twitter Wednesday that the negotiations would require "a different structure" and would need to allow America to "verify results after completion."

It was unclear what kind of structure the president had in mind.

After high-level talks last week in Washington, Beijing agreed in a joint statement with the U.S. to "substantially reduce" America's trade deficit with China. But it failed to commit to shrink that deficit by any specific amount. The Trump administration had sought to slash the gap by $200 billion.

And the statement said little of the key dividing issue between Washington and Beijing: The methods China uses to try to overtake U.S. technological supremacy — from cyber theft to its demands that American companies hand over some of their technology in exchange for access to the Chinese market.

Still, Treasury Secretary Steven Mnuchin said China had agreed to dramatically increase purchases of U.S. farm and energy products. And on Monday, Trump had hailed the cease-fire as a big victory for U.S. farmers. Commerce Secretary Wilbur Ross will soon travel to Beijing to try to settle the details.

But the agreement — which contained no specifics — drew fire from those who had supported Trump's campaign pledge to crack down on what they call China's abusive commercial trade practices. Dan DiMicco, a former steel executive who advised Trump during the 2016 presidential campaign, dismissed the truce as "more false promises and delaying tactics."

Last month, the administration proposed tariffs on $50 billion of Chinese imports to protest the forced technology transfers. Trump later ordered Lighthizer to seek up to an additional $100 billion in Chinese products to tax.

China responded by targeting $50 billion in U.S. products, including soybeans, which would deal a blow to Trump supporters in America's heartland. Financial markets rallied Monday on word of the U.S.-China cease-fire.

The negotiations to rewrite the 24-year-old NAFTA, meanwhile, have bogged down, in part over the United States' insistence on steps that would encourage automakers to move production to the United States from Mexico. Mnuchin has warned that the NAFTA talks could spill over into 2019.

But Trump sounded an optimistic note Wednesday. He told reporters on the South Lawn that while Mexico and Canada have been "very difficult to deal with" during the negotiations, "I will tell you in the end we win, we will win and will win big ... Our auto workers are going to be extremely happy."

In the dispute with U.S. allies over tariffs on steel and aluminum that Trump imposed in March, the administration has argued that a reliance on imported metals posed a threat to U.S. national security. The president spared Canada, Mexico and the EU from the tariffs. But their exemption expires June 1, and they are seeking permanent exemptions.

If the EU doesn't receive permanent tariff relief, it is prepared to complain to the World Trade Organization and to retaliate against the U.S. with tariffs on such iconic U.S. products as Harley Davidson motorcycles, Levi's jeans and Kentucky bourbon.

"We believe that European exports of steel and aluminum pose no threat to either the American economy, the steel industry or to American security," said David O'Sullivan, the EU's ambassador to the United States. "We are looking for a permanent exemption. In the event we do not get that and the tariffs are imposed, we would reserve our right to action under the WTO."

O'Sullivan said the EU was willing to talk to the U.S. about a deal to reduce industrial tariffs, especially in autos, and to liberalize government contracts — but not until Washington drops the metals tariffs.

"We're not in the business of holding talks under the threat of sanctions," he said.

The U.S. didn't offer even a temporary exemption to Japan, America's most important ally in Asia.

"We are working to get the American side to reconsider," said Takehiro Shimada, spokesman for the Japanese embassy in Washington.

The Federal Reserve is beginning to worry about the economic fallout from a trade war. Minutes of the Fed's meeting last month released Wednesday noted that concerns have been raised in several of the Fed's 12 regions "about the possible adverse effects of tariffs and trade restrictions."

Those worries included fears that the uncertainty raised by U.S. involvement in a trade war could cause companies to postpone their plans to boost capital spending to expand and modernize their facilities.

Source: AP

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