The United States is willing to show China some flexibility on its promises to boost American imports, as long as Beijing is ensuring that exports do not rise when production returns to its peak and widen the trade imbalance between the two economies largest in the world, people familiar with the discussions said.
Given Beijing’s focus on containing the coronavirus outbreak and the country’s lagging demand for U.S. imports, U.S. officials have told their Chinese counterparts that the buying push, signed off in January with specific dates and products, could start slowly, according to people in Washington and Beijing with knowledge of the discussions.
But that understanding comes with some conditions, according to these people. The Trump administration has made clear that this is only an option as long as there is no jump in Chinese exports when virus-related industrial shutdowns end.
A sharp rise in Chinese shipments without a corresponding increase in imports would widen the U.S. trade deficit with China, President Donald Trump has frequently based his success on. One of the people said another condition is that the total purchase targets cannot change and that China will meet the commitments eventually.
The White House declined to comment and directed questions to the U.S. Trade Representative. A USTR spokesman said the agency had not had a conversation with its Chinese counterparts, adding that the United States expects China to honor its commitments under the deal.
China's Commerce Ministry, which is leading the trade talks, did not respond to a request for comment.
The US-China trade balance is Trump's go-to measure of who is winning the global battle for economic supremacy. Therefore, There is likely to be little patience left in the US administration, particularly ahead of Trump's re-election bid in November., to allow China to delay purchases while exports accelerate.
People familiar with the matter did not say how China would ensure there is no surge in exports. During the first two months of this year, China had a trade surplus of $25.4 billion with the United States. The U.S. trade deficit with China narrowed in January to $23.7 billion, the smallest since 2011, according to U.S. data released last week.
China's progress
The phase-one trade deal that led to a tariff cease-fire took effect in mid-February. China has since made progress in meeting some of the requirements, lowering tariffs, easing restrictions on U.S. agricultural products and approving Mastercard Inc. to set up a bank card clearing business.
But with the economy shut down for much of January and February because of the Lunar New Year holiday and then the virus outbreak, there has been little sign of China making good on the promise in the deal that matters most to Trump: a massive increase in its purchases from the United States.
China agreed to increase its imports of U.S. goods and services by $76.7 billion over the level in 2017 in the first year of the deal, and then by $123.3 billion in the second year, boosting imports by a total of $200 billion over two years. A more detailed annex to the deal laying out specific products and their target numbers was classified.
The document also set out regular meetings to discuss progress and implementation of the deal. The two sides are preparing for the talks, according to one of the people familiar with their preparations.
Trump acknowledged last week that the buying spree might not be fully in place before November.
«They're going to start kicking pretty soon. Unfortunately, by the time we get to the election, they'll already be partially involved."," the president said of his deal with China and other trade agreements in an interview with Fox News host Sean Hannity last Wednesday.
Source: Bloomberg
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