Trump says inclined to extend China trade deadline, to meet Xi soon

US President Donald Trump meets with Chinese Vice Premier Liu He (R) in the Oval Office at the White House in Washington, US. (Reuters pic)

WASHINGTON: President Donald Trump said on Friday there was “a very good chance” the United States would strike a deal with China to end their trade war and that he was inclined to extend his March 1 tariff deadline and meet soon with Chinese President Xi Jinping.

US and Chinese negotiators had made progress and will extend this week’s round of negotiations by two days through Sunday, Trump told reporters at the White House as he met with his top negotiators and their counterpart, Chinese Vice Premier Liu He.

“I think that we both feel there’s a very good chance a deal will happen,” Trump said.

Liu agreed there had been “great progress”.

“From China, we believe that (it) is very likely that it will happen and we hope that ultimately we’ll have a deal. And the Chinese side is ready to make our utmost effort,” he said at the White House.

The Republican president said he probably would meet with Xi in March in Florida to decide on the most important terms of a trade deal.

Extending the deadline would put on hold Trump’s threatened tariff increase to 25% from 10% on US$200 billion of Chinese imports into the United States. That would prevent a further escalation in a trade war that already has disrupted commerce in goods worth hundreds of billions of dollars, slowed global economic growth and roiled markets.

Optimism that the two sides will find a way to end the trade war lifted stocks, especially technology shares. The S&P 500 stock index reached its highest closing level since Nov 8. Oil prices rose to their highest since mid-November, with Brent crude reaching a high of US$67.73 a barrel.

Currency agreement

Trump and Treasury Secretary Steven Mnuchin said the two sides had reached an agreement on currency. Trump declined to provide details, but US officials long have expressed concerns that China’s yuan is undervalued, giving China a trade advantage and partly offsetting US tariffs.

Announcement of a pact aimed at limiting yuan depreciation was putting “the currency cart before the trade horse,” but would likely be positive for Asian emerging market currencies, said Alan Ruskin, global head of currency strategy at Deutsche Bank in New York. “How can you agree to avoid excessive Chinese yuan depreciation or volatility if you have not made an agreement on trade that could have huge FX implications?” Ruskin asked in a note to clients.

In a letter to Trump read aloud by an aide to Liu at the White House, Xi called on negotiators to work hard to strike a deal that benefits both country.

Trump said a deal with China may extend beyond trade to encompass Chinese telecommunications companies Huawei Technologies and ZTE Corp .

The Justice Department has accused Huawei of conspiring to violate US sanctions on Iran and of stealing robotic technology from T-Mobile US Inc.

Chinese peer ZTE was last year prevented from buying essential components from US firms after pleading guilty to similar charges, crippling its operations.

Memorandums no more

Trump appeared at odds with his top negotiator, US Trade Representative Robert Lighthizer, on the preliminary terms that his team is outlining in memorandums of understanding for a deal with China. Trump said he did not like MOUs because they are short term, and he wanted a long-term deal.

“I don’t like MOUs because they don’t mean anything,” Trump said. “Either you are going to make a deal or you’re not.”

Lighthizer responded testily that MOUs were binding, but that he would never use the term again.

Reuters reported exclusively on Wednesday that the two sides were drafting the language for six MOUs covering the most difficult issues in the trade talks that would require structural economic change in China.

Negotiators have struggled this week to agree on specific language within those memorandums to address tough US demands, according to sources familiar with the talks. The six memorandums include cyber theft, intellectual property rights, services, agriculture and non-tariff barriers to trade, including subsidies.

An industry source briefed on the talks said both sides have narrowed differences on intellectual property rights, market access and narrowing a nearly US$400 billion US trade deficit with China. But bigger differences remain on changes to China’s treatment of state-owned enterprises, subsidies, forced technology transfers and cyber theft of US trade secrets.

Lighthizer pushed back when questioned on forced technology transfers, saying the two sides made “a lot of progress” on the issue, but did not elaborate.

The United States has said foreign firms in China are often coerced to transfer their technology to Chinese firms if they want to operate there. China denies this.

The US Chamber of Commerce on Friday urged the US government to ensure the deal was comprehensive and addressed core issues, rather than one based on more Chinese short-term purchases of goods.

China has pledged to increase purchases of agricultural produce, energy, semiconductors and industrial goods to reduce its trade surplus with the United States.

China committed to buying an additional 10 million tonnes of US soybeans on Friday, US Agriculture Secretary Sonny Perdue said on Twitter. China bought about 32 million tonnes of US soybeans in 2017.

The commitments are a “show of good faith by the Chinese” and “indications of more good news to come,” Perdue wrote.

China was the top buyer of US soybeans before the trade war, but Beijing’s retaliatory tariffs on US soybeans slashed business that had been worth US$12 billion annually.