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Trump and Xi Agree to ‘Truce’ and Vow to Get Trade Negotiations Back on Track

Posted July 03, 2019

Following discussions on the sidelines of the G-20 meeting in Osaka, Japan, President Trump and his Chinese counterpart Xi Jinping appear to have agreed to get the stalled trade talks between the world’s two largest economies back on track.

While this came as welcome news after a series of bellicose threats Trump had made ahead of the meeting, it remains somewhat unclear exactly what the two leaders agreed to during their hour-long talk and no formal plan has yet been announced for a official meeting between U.S. Trade Representative Robert Lighthizer and Beijing’s top negotiator, Vice Premier Liu He.

In spite of that, back in the White House on Monday, Trump said that trade talks had already started. “They’re speaking very much on the phone and also meeting,” the president told reporters, though their subsequent attempts to confirm this proved unsuccessful and “soon” appears to the be the closest thing to a timeline for the resumption of talks.

Despite reports at the time of the two sides being close to a deal, negotiations broke down suddenly last May amid mutual accusations of bad faith. According to some reports, China allegedly backtracked on a series of legislative commitments it had made to prevent forced technology transfers and other intellectual property transgressions. Despite agreeing on the new measures the two sides had previously worked out, Beijing suddenly balked at the continuing trade enforcement provisions called for by Washington.

During the meeting between the two leaders last week, Trump agreed to hold off on raising tariffs and, surprising many, to relax the controversial Huawei ban, allowing U.S. companies to continue doing business with the Chinese telecom giant. In exchange for the concessions, China will buy a “tremendous amount” of American food and agricultural products, Trump said.

According to Gordon Chang, China scholar and friend of influential trade adviser Peter Navarro, Trump’s easing of restrictions on Huawei are “disturbing” given that the U.S. considers the company’s products a threat to national security because they could be compromised by Chinese intelligence.

“I can’t come up with a rationale for doing this,” he said of the Huawei decision. “When we look at Huawei, you know, they compete with us and so do others. That’s fair. But what is not fair is that Huawei, from its founding in 1987 to today, has been stealing U.S. intellectual property.”

Trump’s Huawei concession mirrors his reprieve last May of ZTE, another large Chinese telecom-equipment maker deemed a security risk, which was removed from the Entity List in what Trump described as a “personal favor” to his “good friend” Xi Jinping.

In comments following their meeting, Trump said it would be “historic” if the two countries could conclude what he called a “fair trade deal.” Such an agreement was something that Trump said both he and the Chinese president were “totally open to.”

Earlier, when speaking of the “excellent relationship” between the two leaders, Trump remarked that “we want to do something that will even it up with respect to trade.” This, he claimed knowingly, was “actually very easy to do.”

Trump concluded his remarks following the meeting with Xi by saying that “I think we can go on to do something that truly will be monumental and great for both countries, and that’s what I look forward to doing.”

Meanwhile...

The U.S. trade deficit in May rose a sharp $4.3 billion, or 8.4%, to reach $55.5 billion, despite efforts by President Trump to increase the country’s net exports. The goods trade deficit with China, a key focus of the administration’s “America First” trade agenda, increased 12.2% to $30.2 billion, with imports rising 12.8%.

Bottom Line

For importers, the most significant development in recent days was Trump’s agreement to withdraw — for now, at least — his threat to impose punitive tariffs on more than $300 billion of Chinese imports. However, the stiff duties that he slapped on some $250 billion of Chinese imports last summer and fall remain in place, as do the retaliatory tariffs that Beijing imposed on U.S. goods.

Regarding the stalled trade talks, both sides have agreed they should resume where things left off prior to suddenly breaking down in May. Experts note, however, that “significant obstacles” remain to obtaining a long-term agreement due to the lack of an agreed dispute settlement mechanism and differences over core issues such as technology, intellectual property protection, industrial policies and the creation of a level playing field for foreign firms operating in China.