Trump favors ‘whole deal’ with China, two sides prepare for trade talks

By Jeff Mason and Chris Prentice

WASHINGTON (Reuters) – President Donald Trump said on Thursday he preferred a comprehensive trade deal with China but did not rule out the possibility of an interim pact, even as he said an “easy” agreement would not be possible.

“I’d rather get the whole deal done,” Trump told reporters at the White House. “I see a lot of analysts are saying an interim deal, meaning we’ll do pieces of it, the easy ones first. But there’s no easy or hard. There’s a deal or there’s not a deal. But it’s something we would consider, I guess.”

The president’s remarks came as the world’s two largest economies prepare for new rounds of talks aimed at curbing a more-than-year-long trade war that has hurt global economic growth and rattled financial markets.

The two sides have been making conciliatory gestures ahead of the talks, lowering the temperature between them and cheering investors.

China renewed purchases of U.S. farm goods, which the United States welcomed, and Trump delayed a tariff increase on certain Chinese goods by two weeks in honor, he said, of Chinese President Xi Jinping.

Lower-level U.S. and Chinese officials are expected to meet next week in Washington ahead of talks between senior trade negotiators in early October. Top-level negotiators last met face-to-face in China in July.

Washington is pressing China to end practices it considers unfair, including intellectual property theft, industrial subsidies, currency manipulation, and forced technology transfer from U.S. companies to Chinese counterparts.

Trump has made clear he wants such elements to be part of a deal and has demonstrated his resolve through tariff increases, even when they dented gains in the stock market.

Meeting U.S. demands would require structural change in China, which so far it has been unwilling to make. The two sides came close to a deal in May, but Chinese officials balked at requirements that Chinese laws be altered as part of the deal.

ECONOMIC IMPACT

The trade war is affecting the global economy. The International Monetary Fund on Thursday forecast that U.S. and Chinese tit-for-tat tariffs could reduce global GDP in 2020 by 0.8% and trigger more losses afterward.

Still, global stocks rose on Thursday after the conciliatory gestures from both sides.

China importers bought at least 10 cargoes, or 600,000 tonnes, of U.S. soybeans for October-December shipment, the country’s most significant purchases since at least June, U.S. traders with direct knowledge of the deals said.

That came after Trump on Wednesday announced his delay in the increase in tariffs on some Chinese goods by two weeks and China exempted some U.S. drugs and other goods from tariffs.

While welcoming China’s overtures, U.S. Treasury Secretary Steven Mnuchin sought to temper optimism in markets that the gestures might lead to a trade deal. He told CNBC that Trump was prepared to keep or even raise tariffs on Chinese imports and that Beijing had asked for more concessions beyond the removal of tariffs.

“The next month is important,” Mnuchin said at a later event hosted by the New York Times. “We’re hopeful we’ll make progress. If we can get the right deal, we’ll do a deal.”

NO CHANGE ‘ON THE FUNDAMENTALS’

The Wall Street Journal reported that China was seeking to narrow the scope of negotiations to trade matters by excluding national security issues. National security issues have not, however, been a key topic in the trade talks so far.

The soybean purchases sent benchmark prices of the commodity, of which China is the top buyer, soaring. They were the largest by private Chinese importers since Beijing raised import tariffs on the U.S. oilseed by 25% in July 2018 in retaliation for U.S. duties on Chinese goods. Duties were raised an additional 5% this month.

U.S. farmers, a core component of Trump’s political base, have been among the hardest hit by the tariff battle that began more than a year ago and has escalated in recent weeks.

Earlier in the day in Beijing, Commerce Ministry spokesman Gao Feng said Chinese firms have started to inquire about prices for U.S. farm goods. He also said that China welcomed the U.S. delay to its scheduled tariff hike on billions of dollars worth of Chinese goods.

“(China) hopes both sides would continue to meet each other half way and adopt concrete actions to create favorable conditions for negotiations,” Gao told a briefing, noting that possible purchases included pork and soybeans, both of which are still subject to hefty Chinese duties.

China has bought U.S. pork despite tariffs of 62% in place since last year because huge numbers of pigs have been culled across the country as Beijing struggles to contain an outbreak of African swine fever. The world’s biggest pork consumer has hiked imports to make up the shortfall.

China said it would reduce purchases of U.S. farm products in August after Trump vowed to impose new tariffs on around $300 billion of Chinese goods.

On Wednesday Trump announced a delay in increasing tariffs on $250 billion worth of Chinese imports to Oct. 15 from Oct. 1. The tariffs on those goods were set to increase to 30% from 25%.

Earlier that day China announced it was exempting 16 types of U.S. products from tariffs, including some anti-cancer drugs and lubricants, as well as animal feed ingredients whey and fish meal.

William Reinsch, a former senior U.S. Commerce Department official, said the goodwill gestures should help, but big hurdles remained.

“Both sides are trying to find a way out of the box,” he said. “Short term, that’s good. But I don’t think anything’s changed on the fundamentals, and once they get back to the table, they’ll discover that.”

(Additional reporting by Stella Qiu, Ben Blanchard, Michael Martina, and Dominique Patton in Beijing, and Andrea Shalal in Washington; Editing by Sandra Maler)

China hopes U.S. will create conditions necessary for September trade talks

FILE PHOTO: U.S. dollar and China yuan notes are seen in this picture illustration June 2, 2017. REUTERS/Thomas White/Illustration/File Photo

BEIJING (Reuters) – China and the United States are discussing the next round of face-to-face trade talks scheduled in September, but hopes for progress hinge on whether Washington can create favorable conditions, China’s commerce ministry said on Thursday.

In the latest tit-for-tat escalation of the trade war between the world’s two largest economies, U.S. President Donald Trump last Friday said he would heap an additional duty of 5% on about $550 billion in targeted Chinese goods.

The move came hours after China had unveiled retaliatory tariffs on $75-billion worth of U.S. goods.

China hopes the United States can cancel the planned additional tariffs to avoid an escalation in the trade war, its commerce ministry spokesman, Gao Feng, told reporters on Thursday.

“The most important thing at the moment is to create necessary conditions for both sides to continue negotiations,” he said during a weekly briefing, adding that China was lodging “solemn representation” with the United States.

For two years, the Trump administration has sought to pressure China to eliminate what it calls unfair trade practices and make sweeping changes to its policies on intellectual property protection, forced transfers of technology to Chinese firms, industrial subsidies and market access.

But China has constantly denied such accusations, vowing to fight back in kind and criticizing U.S. measures as protectionist.

Gao said China had “ample” countermeasures to retaliate against the planned U.S. tariffs, but talks in the current circumstances should focus on whether the tariffs could be canceled.

He did not answer directly when asked if his remarks suggested China would not retaliate against the latest U.S. tariff threat.

China has repeatedly said it would have no choice but to retaliate if the United States followed through on its threat.

On Monday, Trump predicted a trade deal with China, saying he believed it was sincere about wanting to reach a deal, citing what he called increasing economic pressure on Beijing and job losses there.

Trump cited as a positive sign comments by Vice Premier Liu He, who has been leading the talks with Washington, that China was willing to resolve the dispute through “calm” negotiations.

He repeated his assertion that Chinese officials had contacted U.S. trade counterparts overnight, offering to resume negotiations, a statement that China declined to confirm.

Gao also declined to provide any detail when asked if there had been a call this week between Beijing and Washington.

“As far as I know, both trade teams have maintained effective communication,” he said.

In July 2018, the U.S.-China trade dispute boiled over in tariffs on hundreds of billions of dollars’ worth of each other’s goods and threatens to engulf all trade between the countries, putting global growth at risk.

“We hope the United States will show sincerity and concrete actions,” Gao said.

(Reporting by Stella Qiu and Se Young Lee; Writing by Yawen Chen; Editing by Simon Cameron-Moore and Clarence Fernandez)

On the front lines: Trade war sinks North Dakota soybean farmers

Paul and Vanessa Kummer check the soybeans on their farm near Colfax, North Dakota, U.S., August 6, 2019. REUTERS/Dan Koeck

By Karl Plume

COLFAX, North Dakota (Reuters) – North Dakota bet bigger on Chinese soybean demand than any other U.S. state.

The industry here – on the far northwestern edge of the U.S. farm belt, close to Pacific ports – spent millions on grain storage and rail-loading infrastructure while boosting plantings by five-fold in 20 years.

Now, as the world’s top soybean importer shuns the U.S. market for a second growing season, Dakota farmers are reeling from the loss of the customer they spent two decades cultivating.

The state’s experience underscores the uneven impact of the U.S.-China trade war across the United States. Although China’s tariffs target many heartland states that, like North Dakota, supported President Donald Trump’s 2016 election, those further south and east are better able to shift surplus soybeans to other markets such as Mexico and Europe. They also have more processing plants to produce soymeal, along with larger livestock and poultry industries to consume it.

For North Dakota, losing China – the buyer of about 70% of the state’s soybeans – has destroyed a staple source of income. Agriculture is North Dakota’s largest industry, surpassing energy and representing about 25% of its economy.

“North Dakota has probably taken a bigger hit than anybody else from the trade situation with China,” said Jim Sutter, CEO of the U.S. Soybean Export Council.

In its second-quarter agricultural credit conditions survey this month, the Federal Reserve Bank of Minneapolis said 74% of respondents in North Dakota reported lower net farm income.

China shut the door to all U.S. agricultural purchases on Aug. 5 after Trump intensified the conflict with threats to impose additional tariffs on $300 billion in Chinese imports, some as soon as Sept. 1.

Some farmers were relying on the Trump administration’s $28 billion in farm aid payments to compensate them for trade war losses, only to be disappointed with new payment rates for counties in North Dakota.

The rates are below those for some southern states that rely much less on exports to China. The U.S. Department of Agriculture determined other states had a higher “level of exposure” to tariffs than North Dakota because they also grow other crops, such as cotton and sorghum, that were hit by Chinese tariffs, according to a brief written statement from the USDA in response to questions from Reuters.

With record soy supplies still in storage and another crop to be harvested soon, farmers in the U.S. soybean state with the best access to ports serving China are unable to sell their crops at a profit.

Rail shippers would normally send more than 90 percent of the North Dakota soybeans they buy to Pacific Northwest export terminals. Now they are trying unsuccessfully to make up the shortfall by hauling corn, wheat and other crops with limited demand. Some are moving soybeans south and east to domestic users, a costlier endeavor that ultimately thins margins for both shippers and farmers.

LOST DEMAND

Soy farmers who planted this spring – when the White House was talking up a nearly finished trade deal with China – watched as those trade talks collapsed in May, sending prices well below their costs of production.

Vanessa Kummer checks the quality of their 2018 soybean crops on the family farm near Colfax, North Dakota, U.S., August 6, 2019. REUTERS/Dan Koeck

Vanessa Kummer checks the quality of their 2018 soybean crops on the family farm near Colfax, North Dakota, U.S., August 6, 2019. REUTERS/Dan KoeckVanessa Kummer’s farm in Colfax, North Dakota, has yet to sell a single soybean from the fall harvest because of the low prices. Normally, the farm would have forward-sold 50% to 75% of the upcoming harvest.

 

Vanessa Kummer’s farm in Colfax, North Dakota, has yet to sell a single soybean from the fall harvest because of the low prices. Normally, the farm would have forward-sold 50% to 75% of the upcoming harvest

She fears the U.S.-China soy trade is now “permanently damaged” as China shifts its purchases to Brazil, uses less soy in animal feed and consumes less pork as African swine fever kills of millions of the nation’s pigs.

“It will take years to get back to any semblance of what we had over in China,” Kummer said, standing in a sparse field of ankle-high soy plants, where two weeks earlier she hosted a delegation of soy importers from Ecuador and Peru.

Though it is the No. 4 soy state overall, North Dakota is home to two of the top three U.S. soy producing counties in the nation.

Options for North Dakota farmers are limited. U.S. wheat has been losing export market share for years. Demand for specialty crops such as peas and lentils, which grow well in the northern U.S., has been dampened by retaliatory tariffs imposed by India, a major importer of both products.

ROOTS OF DEPENDENCE

North Dakota’s farmers never set out to become so dependent on a single buyer of one crop. But with wheat profits shrinking and Chinese demand for soy growing, soybeans increasingly seemed like the obvious choice.

Companies including Berkshire Hathaway’s BNSF expanded rail capacity to open up a West Coast shipping corridor, and Pacific Northwest seaports expanded to handle more exports to China. Seed companies offered North Dakota farmers new varieties that allowed soybeans to thrive in the state’s colder climate and shorter growing season.

A $200 million crop two decades ago blossomed into a $2 billion crop, topping the value of wheat, once North Dakota’s top crop.

The number of high-speed shuttle train loading terminals in North Dakota tripled from about 20 in 2007 to more than 60 currently, according to industry data, with investments totaling at least $800 million.

But one of those facilities, CHS Dakota Plains Ag elevator in Kindred, North Dakota, has gone three or four months without loading a soybean train this year, said Doug Lingen, a grain merchant there. Normally the elevator would load at least one train a month with beans bound for the Pacific Northwest.

LIMPING ALONG

The drop in demand has soybean prices in North Dakota trading at a historic discount to U.S. futures prices, and farmers are putting investments on hold.

Justin Sherlock, who grows corn, soybeans and other crops near Dazey, North Dakota, had been planning to buy a used grain drier this year for around $100,000 to $150,000, passing on a new one that would be at least $350,000.

But an uncertain future has now shelved those plans, even with the latest promise for government aid. According to rates published last month, farmers in Sherlock’s county can apply for aid of $55 per acre, well below the maximum $150 rate offered in 22 counties nationwide.

Sherlock called the latest announcement “disappointing.”

“I’m just going to defer all my investment,” he said, “and try to limp along for a few years.”

(Reporting by Karl Plume in Chicago, additional reporting by P.J. Huffstutter; Editing by Caroline Stauffer and Brian Thevenot)

China buys U.S. soybeans after declaring ban on American farm goods

FILE PHOTO: Soybeans fall into a bin as a trailer is filled at a farm in Buda, Illinois, U.S., July 6, 2018. REUTERS/Daniel Acker

By Tom Polansek

CHICAGO (Reuters) – China snapped up a small volume of U.S. soybeans last week after pledging to halt purchases of American farm products due to the escalating trade war between Washington and Beijing, U.S. Department of Agriculture data showed on Thursday.

The world’s largest soybean importer struck deals from Aug. 9 to 15 to buy 9,589 tonnes for delivery in the current marketing year and 66,000 tonnes, approximately one cargo, for the next year, the data showed.

China’s Commerce Ministry said on Aug. 5 that Chinese companies stopped buying U.S. farm products in the latest escalation of the trade war between the world’s two largest economies.

“You do have some buying going on,” said Arlan Suderman, chief commodities economist for INTL FCStone. “It’s a little bit of a surprise.”

China last year imposed retaliatory tariffs that remain in place on imports of U.S. farm products including soybeans and pork. The duties have slashed exports of U.S. crops and prompted the Trump administration to compensate American farmers for losses over two years with as much as $28 billion.

China said on Thursday it hopes the United States will stop a plan to impose new tariffs, adding that any new duties would lead to a further escalation.

China has largely turned to South America for soybeans since the trade war began last year. U.S. soybean sales to China in 2018 dropped 74% from the previous year.

“Compared to what they used to buy, they essentially have halted – but some have gotten through,” Suderman said.

The sales of 9,589 tonnes for delivery in the current marketing year will probably be rolled ahead to be delivered in the next year, which begins on Sept. 1, said Don Roose, president of Iowa-based broker U.S. Commodities.

The cargo sold for delivery in the next marketing year could have been in the works before Beijing said Chinese companies would suspend purchases of U.S. farm goods, said Terry Reilly, senior commodity analyst for Futures International.

“The government may have just given the green light to say, ‘Let this one go through,'” Reilly said.

“One cargo is not going to change the fact that they’re not buying millions of tons of soybeans.”

(Reporting by Tom Polansek; Editing by Marguerita Choy)

Trump vows to help farmers as China halts U.S. agricultural purchases

FILE PHOTO: U.S. Dollar and China Yuan notes are seen in this picture illustration June 2, 2017. REUTERS/Thomas White/Illustration/File Photo/File Photo

By Susan Heavey

WASHINGTON (Reuters) – U.S. President Donald Trump on Tuesday vowed to protect American farmers against China by signaling to provide further aid if needed, a day after Chinese firms stopped agricultural purchases and Beijing threatened more tariffs on U.S. farm products.

“Our great American Farmers know that China will not be able to hurt them in that their President has stood with them and done what no other president would do – And I’ll do it again next year if necessary!” Trump tweeted on Tuesday.

U.S. farmers, a key political constituency for Trump, have been among the hardest hit in the trade war between the world’s two largest economies. Shipments of soybeans, the most valuable U.S. farm export, to top buyer China sank to a 16-year low in 2018.

To compensate for the losses, the Trump administration has rolled out up to $28 billion in federal aid since the trade war began last year, and the Agriculture Department to date has made $8.6 billion of direct aid payments to farmers.

The latest federal aid package of up to $16 billion was rolled out in July and the first tranche for the payments are expected to begin in mid-to-late August.

Promises of large agricultural purchases by China have been a key element of a potential trade deal, but Trump last week said Beijing had not fulfilled a promise to buy large volumes of U.S. farm products and vowed to impose a 10% tariff on a further $300 billion in Chinese imports starting Sept. 1.

On Monday, China’s Commerce Ministry said Chinese companies have stooped buying U.S. farm products and added that Beijing may also impose additional tariffs on American agricultural goods, a move that could further hurt U.S. farm states that are key for Trump’s 2020 re-election bid.

Overall, China has purchased about 14.3 million tonnes of last season’s soybean crop, the least in 11 years, and some 3.7 million tonnes still need to be shipped, according to U.S. data. China bought 32.9 million tonnes of U.S. soybeans in 2017.

(Reporting by Susan Heavey; Additional reporting and writing by Humeyra Pamuk; Editing by Bernadette Baum and Paul Simao)

China warns of retaliation after Trump threatens fresh tariffs

By Andrea Shalal, Alexandra Alper and Huizhong Wu

BEIJING/WASHINGTON (Reuters) – China on Friday said it would not be blackmailed and warned of retaliation after U.S. President Donald Trump vowed to slap a 10% tariff on $300 billion of Chinese imports from next month, sharply escalating a trade row between the world’s biggest economies.

Trump stunned financial markets on Thursday by saying he plans to levy the additional duties from Sept. 1, marking an abrupt end to a truce in a year-long trade war that has slowed global growth and disrupted supply chains.

Beijing would not give an inch under pressure from Washington, Chinese Foreign Ministry spokeswoman Hua Chunying said.

“If America does pass these tariffs then China will have to take the necessary countermeasures to protect the country’s core and fundamental interests,” Hua told a news briefing in Beijing.

“We won’t accept any maximum pressure, intimidation or blackmail. On the major issues of principle we won’t give an inch,” she said, adding that China hoped the United States would “give up its illusions” and return to negotiations based on mutual respect and equality.

Trump also threatened to further raise tariffs if Chinese President Xi Jinping fails to move more quickly to strike a trade deal.

The newly threatened duties, which Trump announced in a series of tweets after his top trade negotiators briefed him on a lack of progress in talks in Shanghai this week, would extend tariffs to nearly all Chinese goods that the United States imports.

The president later said if trade discussions failed to progress he could raise tariffs further – even beyond the 25 percent levy he has already imposed on $250 billion of imports from China.

Senior Chinese diplomat Wang Yi told reporters on the sidelines of an Association of Southeast Nations event in Thailand that additional tariffs were “definitely not a constructive way to resolve economic and trade frictions”.

U.S. Secretary of State Mike Pompeo, who was also in Bangkok, decried “decades of bad behavior” by China on trade and said Trump had the determination to fix it.

The news hit financial markets hard. On Friday, Asian and European stocks took a battering and safe-haven assets such as the yen, gold and government bonds jumped as investors rushed for cover.

Retail associations in the United States predicted a spike in consumer prices, hitting consumer stocks on Thursday on Wall Street, where Target Corp tumbled 4.2%, Macy’s Inc fell 6% and Nordstrom Inc was down 6.2%.

Asked about the impact on financial markets, Trump told reporters: “I’m not concerned about that at all.”

Moody’s said the new tariffs would weigh on the global economy at a time when growth is already slowing in the United States, China and the euro zone.

The tariffs may also force the Federal Reserve to again cut interest rates to protect the U.S. economy from trade-policy risks, experts said.

CHINESE RETALIATION?

One Chinese official told Reuters it was not the first time Trump had “flip-flopped”, and that though the time between the talks being declared constructive and Trump’s threat of new tariffs was short, officials in Beijing were already prepared.

“Discussion followed by a fight has become the normal pattern,” the official said.

Possible retaliatory measures by China could include tariffs, a ban on the export of rare earths that are used in everything from military equipment to consumer electronics, and penalties against U.S. companies in China, analysts say.

So far, Beijing has refrained from slapping tariffs on U.S. crude oil and big aircraft, after cumulatively imposing additional retaliatory tariffs of up to 25% on about $110 billion of U.S. goods since the trade war broke out last year.

China is also drafting a list of “unreliable entities” – foreign firms that have harmed Chinese interests. U.S. delivery giant FedEx is under investigation by China.

“China will deliver each retaliation methodically, and deliberately, one by one,” ING economist Iris Pang wrote in a note.

“We believe China’s strategy in this trade war escalation will be to slow down the pace of negotiation and tit-for-tat retaliation. This could lengthen the process of retaliation until the upcoming U.S. presidential election,” Pang said.

FRUSTRATED

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin briefed Trump earlier this week on their first face-to-face meeting with Chinese officials since Trump met Xi at the G20 summit at the end of June and agreed to a ceasefire in the trade war.

“When my people came home, they said, ‘We’re talking. We have another meeting in early September.’ I said, ‘That’s fine, but until such time as there’s a deal, we’ll be taxing them,” Trump told reporters.

A source familiar with the matter said Trump grew frustrated and composed the tweets shortly after Lighthizer and Mnuchin told him China made no significant movement on its position.

Previous negotiations collapsed in May, when U.S. officials accused China of backing away from earlier commitments.

American business groups in China expressed disquiet over the latest round of U.S. tariffs. The U.S.-China Business Council said on Friday it was concerned the action “will drive the Chinese from the negotiating table, reducing hope raised by a second round of talks that ended this week in Shanghai”.

“We are particularly concerned about increased regulatory scrutiny, delays in licenses and approvals, and discrimination against U.S. companies in government procurement tenders,” said the U.S.-China Business Council’s President Craig Allen in an e-mail.

Ker Gibbs, the president of the American Chamber of Commerce in Shanghai, said that as market access in China “remains unnecessarily restricted”, the United States should continue its dialogue with Beijing, and “also work with like-minded countries to persuade China that fair and reciprocal trade and investment benefits all.”

CROPS AND DRUGS

Trump said Beijing had failed to fulfill promises to stop sales of the synthetic opioid fentanyl to the United States, which U.S. officials say was to blame for most of more than 28,000 synthetic opioid-related overdose deaths in the United States in 2017.

He also said Beijing had not followed through on a goodwill pledge to buy more U.S. agricultural products.

The U.S. Department of Agriculture on Thursday confirmed a small private sale to China of 68,000 tonnes of soybeans in the week ended July 25.

The United States also has yet to ease restrictions on U.S. companies’ sales to Chinese telecommunications giant Huawei, which Trump had pledged as a goodwill gesture to Xi after meeting at the G20 in Osaka.

(Reporting by Andrea Shalal, Alexandra Alper, Steve Holland, David Lawder, Tim Ahmann, Susan Heavey, Makini Brice, Nandita Bose and Jonathan Landay in Washington; and Huizhong Wu, Xu Jing, Stella Qiu, Se Young Lee, and Min Zhang in Beijing; and Brenda Goh in Shanghai; Writing by Ryan Woo and Michael Martina; Editing by Grant McCool, Shri Navaratnam and Alex Richardson)

Kudlow says U.S. expects China to start purchasing crops very soon

FILE PHOTO: White House chief economic advisor Larry Kudlow speaks with reporters on the driveway outside the West Wing of the White House in Washington, U.S. June 27, 2019. REUTERS/Yuri Gripas

WASHINGTON (Reuters) – White House economic adviser Larry Kudlow said on Thursday the United States expects China to start purchasing crops and U.S. agricultural products soon and noted that trade talks between the two countries are ongoing.

The United States and China agreed last month to restart trade talks that stalled in May. President Donald Trump agreed not to impose new tariffs and U.S. officials said China agreed to make agricultural purchases, but those have not yet materialized.

(Reporting by Jeff Mason; Editing by Chizu Nomiyama)

U.S., China to relaunch talks with little changed since deal fell apart

By David Lawder and Chris Prentice

WASHINGTON/NEW YORK (Reuters) – The United States and China are set to relaunch trade talks this week after a two-month hiatus, but a year after their trade war began there is little sign their differences have narrowed.

After meeting with Chinese President Xi Jinping in Japan just in late June, U.S. President Donald Trump agreed to suspend a new round of tariffs on $300 billion worth of imported Chinese consumer goods while the two sides resumed negotiations.

Trump said then that China would restart large purchases of U.S. agricultural commodities, and the United States would ease some export restrictions on Chinese telecom equipment giant Huawei Technologies.

But sources familiar with the talks and China trade watchers in Washington say the summit did little to clear the path for top negotiators to resolve an impasse that caused trade deal talks to break down in early May.

A U.S. official said last week the discussions were expected to resume with a phone call between U.S. Trade Representative Robert Lighthizer, Chinese Vice Premier Liu He and Treasury Secretary Steven Mnuchin.

A USTR spokesman said the call was expected this week, but gave no further details.

The United States is demanding that China make sweeping policy changes to better protect American intellectual property, end the forced transfer and theft of trade secrets and curb massive state industrial subsidies. At stake, U.S. officials say, is dominance of the high-tech industries of the future, from artificial intelligence to aerospace.

“We’ve had a change in atmospherics,” said Derek Scissors, a China expert at the American Enterprise Institute, a business-oriented Washington think tank. “While this is great for markets, the administration has not said one specific thing about how we’re unstuck.”

Scissors, who has at times consulted with Trump administration officials, said that both sides got what they wanted out of the summit — a lowering of the temperature and the avoidance of new tariffs that would have been painful for both sides.

“The pressure for one side to give into the other is diffused right now. I expect this to drag out for months,” Scissors added.

NO FIRM COMMITMENTS

Washington and Beijing appear to have different ideas of what the two leaders agreed in Osaka.

Three sources familiar with the state of negotiations say that the Chinese side did not make firm commitments to immediately purchase agricultural commodities.

One of the sources said Trump raised the issue of agricultural purchases twice during the meeting, but Xi only agreed to consider purchases in the context of a broader final agreement.

Other than a small purchase of American rice by a private Chinese firm, no purchases have materialized. Chinese officials and state media accounts in the past week have emphasized that any deal, including agricultural purchases, is dependent on removal of U.S. tariffs.

“The Chinese have been clear they didn’t promise anything,” said one source familiar with the talks.

“The idea they would give up their main leverage before getting anything doesn’t make sense. I could see them buying some pork and buying some soybeans, but it’s still going to be pennies.”

Trump administration officials have also downplayed the extent of pledges to allow Huawei to purchase U.S. technology products, with White House trade adviser Peter Navarro saying that only “lower-tech” U.S. semiconductors could be made available for sale to the company..

Reuters reported last week that the Commerce Department’s export control enforcement staff was told to continue to treat Huawei as a blacklisted entity as the department considers requests for licenses to U.S. firms to sell products and services to Huawei

Chinese officials point out that they only got the United States to concede on Huawei at the Osaka talks, rather than on their other demand, which was removing the existing tariffs.

So the focus on the upcoming talks will be the scrapping on the tariffs, they say.

A second source said that U.S. tariffs on $250 billion worth of Chinese goods and Chinese tariffs on $160 billion worth of U.S. goods could wind up being “the new normal.”

One Chinese official familiar with the situation said that trade talks would be re-started very quickly, but that there was a “fairly large gap” in the core demands of both countries and it would be a challenge to reach consensus on the toughest issues.

“The negotiating environment is even more severe,” the official said.

Another official said China remained concerned about the presence of hawks in the U.S. team, such as Trump advisor Peter Navarro.

“There are bullies there,” the official said.

The officials spoke to Reuters on condition of anonymity.

China’s foreign ministry cited Xi as telling Trump at Osaka that “on issues concerning China’s sovereignty and dignity, China must safeguard its core interests”.

A senior Beijing-based Asia diplomat said there would be pressure on China’s leadership not to give in to the United States and for any outcomes to seen as equal and balanced.

“A trade deal cannot be portrayed as a victory for the United States,” the diplomat said, citing conversations with Chinese officials.

WHICH TEXT?

There has been no indication the two sides will resume negotiations using a text that had been largely agreed before China backtracked on commitments in early May, prompting Trump to proceed with a long-threatened tariff hike to 25 percent on a $200 billion list of Chinese imports.

Beijing had cut out of that text commitments to make changes to its laws reflecting reform pledges, arguing that this would violate its national sovereignty.

Lighthizer has insisted on legal changes to make it more likely that Chinese reform pledges will be carried out.

Finding a way around this issue is paramount for talks. Beyond that, there are many other difficult issues to resolve, including the structure of an enforcement mechanism designed to hold the two sides to their pledges.

U.S. demands for curbs to provincial and local subsidies for Chinese state companies, access to China’s cloud computing market, agricultural biotech approvals and the ultimate size of China’s purchases of agricultural products are all divisive issues for the two sides.

Claire Reade, a former China trade negotiator at USTR who is now a Washington-based trade lawyer with the firm Arnold and Porter, said there was room on both sides to get a deal.

“It’s a question of political will and there are ways to maneuver around the current red flags that have been put in the ground,” Reade said. “Both President Xi and President Trump have to come out of this saying they stood strong, and they in-effect got a win.”

One way for China to avoid the appearance of giving in to U.S. demands is to take some legal steps on key issues before the deal is agreed. That way they can say they’re doing it on their own terms, she added.

(Additional reporting by Ben Blanchard in Beijing and Andrea Shalal in Washington; Editing by Simon Webb and Alistair Bell)

Trump officials say U.S.-China trade talks to resume next week

Workers load goods for export onto a crane at a port in Lianyungang, Jiangsu province, China June 7, 2019. Picture taken June 7, 2019. REUTERS/Stringer

By Jeff Mason

WASHINGTON (Reuters) – Top representatives of the United States and China are organizing a resumption of talks for next week to try to resolve a year-long trade war between the world’s two largest economies, Trump administration officials said on Wednesday.

“Those talks will continue in earnest this coming week,” White House Economic Adviser Larry Kudlow told reporters in a briefing.

An official from the Office of the U.S. Trade Representative said later that the two sides were in the process of scheduling a principal-level phone call with Chinese officials for next week.

The principal negotiators on the U.S. side are U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, while China’s top negotiator is Vice Premier Liu He.

The two sides have been in communication by telephone since last weekend, when U.S. President Donald Trump and Chinese President Xi Jinping agreed to relaunch talks that had stalled in May.

Kudlow was unclear about the timeline for relaunching face-to-face talks, saying that these would begin “soon” and that an announcement would be forthcoming.

“I don’t know precisely when. They’re on the phone. They’re going to be on the phone this coming week and they’ll be scheduling face-to-face meetings,” he said.

Talks between the two sides broke down in May after U.S. officials accused China of pulling back from commitments it had made previously in the text of an agreement that negotiators said was nearly finished.

The United States accuses China of allowing intellectual property theft and forcing U.S. companies to share their technology with Chinese counterparts in order to do business in China. It wants China to change its laws on those and other issues.

China denies such practices and is reluctant to make sweeping legal changes.

Both countries have levied tariffs on the other, but Trump made two major concessions at the meeting with Xi to get talks started again: he agreed not to put tariffs on some $300 billion in additional Chinese imports and to loosen restrictions on Chinese technology company Huawei.

China welcomed the U.S. decision not to put new tariffs on Chinese goods, commerce ministry spokesman Gao Feng told a regular media briefing on Thursday, but added the removal of existing U.S. tariffs was essential for a trade deal.

“The U.S. move to unilaterally increase tariffs on Chinese imports started the Sino-U.S. economic and trade frictions. If both sides could reach a deal, those tariffs must be completely removed,” said Gao.

The United States has 25% tariffs on $250 billion of Chinese goods now ranging from semi-conductors to furniture.

“We’ve been accommodative. We will not lift tariffs during the talks,” Kudlow said. “We are hoping that China will toe its end of it by purchasing a good many of American imports.”

Gao said China hoped the United States would follow through on Trump’s promise to ease restrictions on telecommunications giant Huawei.

Trump surprised markets on Saturday with an announcement that U.S. companies would be allowed to sell products to Huawei, which was placed on a so-called Entity List in May over national security concerns.

But industry and government officials are uncertain what the new policy will be.

The U.S. Commerce Department is reviewing license requests from U.S. companies seeking to export products to Huawei “under the highest national security scrutiny”.

(Reporting by Jeff Mason and David Lawder in Washington; Additional reporting by Stella Qiu; Editing by James Dalgleish and Lisa Shumaker)

Trump prepares for ‘productive’ talks with Xi on trade war

Japan's Prime Minister Shinzo Abe is flanked by U.S. President Donald Trump and China's President Xi Jinping during a meeting at the G20 leaders summit in Osaka, Japan, June 28, 2019. REUTERS/Kevin Lamarque

By Roberta Rampton

OSAKA (Reuters) – U.S. President Donald Trump on Friday said he hoped for productive talks with Chinese President Xi Jinping on a trade war that is casting a shadow on global growth, but said he had not made any promises about a reprieve from escalating tariffs.

The trade feud and signs of a global slowdown have loomed over a two-day Group of 20 (G20) summit in the Japanese city of Osaka, where Trump and Xi met in passing and prepared for one-on-one talks on Saturday.

To lay the groundwork, Chinese Vice Premier Liu He met Trump’s treasury secretary, Steven Mnuchin, and Trade Representative Robert Lighthizer at the hotel where the U.S. delegation was staying, a source familiar with the talks said.

Expectations have dimmed that the world’s two biggest economies can ease tension when Trump and Xi meet.

“At a minimum it will be productive. We’ll see what happens and what comes out of it,” Trump told reporters after a series of meetings with leaders where he made clear that his priority was two-way trade deals to boost the U.S. economy.

Asked, however, if he had promised Xi a six-month reprieve on imposing new tariffs on a $300 billion list of Chinese imports, Trump said: “No.”

Trump has already imposed tariffs on $250 billion of Chinese imports and is threatening to extend those to another $300 billion of goods, effectively everything China exports to the United States. China has retaliated with tariffs on U.S. imports.

Asian shares stumbled and gold slipped on Friday, as doubts grew that the highly anticipated meeting between the two leaders would bring progress.

In Beijing, foreign ministry spokesman Geng Shuang said he hoped the U.S. side could meet China halfway.

“This accords with the interests of both countries and is what the international community is hoping for,” he told a news briefing.

China has consistently pushed back against criticism from Western countries, especially the United States and European Union, about things like intellectual property rights and the difficulty of doing business in China.

“China’s promise to expand its opening up is not just a cheque that can’t be cashed,” Xi told German Chancellor Angela Merkel at a side meeting in Osaka.

THREAT TO GLOBAL GROWTH

Trump’s administration also has trade feuds with India, Japan and Germany, whose leaders he met on Friday.

Trump said he saw U.S. trade prospects improving, days after criticizing the U.S.-Japan security treaty and demanding that India withdraw retaliatory tariffs.

“I think we’re going to have some very big things to announce. Very big trade deal,” Trump said before he began talks with Indian Prime Minister Narendra Modi. He gave no details.

A White House official said the two leaders had called on their teams to work on mutually beneficial trade solutions.

Trump also made a push to discuss U.S. concerns about Chinese telecoms equipment maker Huawei.

The United States has pressed its allies to shun Huawei in their fifth generation, or 5G, networks on security grounds, and it has also suggested it could be a factor in a trade deal with Xi.

“We actually sell Huawei many of its parts,” Trump said at his meeting with Modi. “So we’re going to be discussing that and also how India fits in. And we’ll be discussing Huawei.”

Several leaders warned that the growing Sino-U.S. trade friction was threatening global growth.

“The trade relations between China and the United States are difficult, they are contributing to the slowdown of the global economy,” European Commission President Jean-Claude Juncker told a news conference.

Xi also warned about the protectionist steps he said some developed countries were taking.

“All this is destroying the global trade order … This also impacts common interests of our countries, overshadows peace and stability worldwide,” Xi told a gathering of leaders of the BRICS grouping on the sidelines of the G20.

Japanese Prime Minister Shinzo Abe, other leaders and delegates attend a family photo session at G20 leaders summit in Osaka, Japan, June 28, 2019. REUTERS/Kim Kyung-Hoon/Pool

Japanese Prime Minister Shinzo Abe, other leaders and delegates attend a family photo session at G20 leaders summit in Osaka, Japan, June 28, 2019. REUTERS/Kim Kyung-Hoon/Pool

REFORMING WORLD TRADE RULES

Modi, at the same meeting, called for a focus on reforming the World Trade Organization (WTO) and Russian President Vladimir Putin decried what he called efforts to destroy the Geneva-based body.

“We consider counter-productive any attempts to destroy WTO or to lower its role,” Putin said.

The situation of the global economy was worrying, as trade felt the effect of “protectionism (and) politically motivated restrictions”, he added.

Russian Economy Minister Maxim Oreshkin said there was no agreement on how to reform the WTO system, whose rules Washington believes are outdated, though a Japanese official said G20 members agreed on the importance of reform.

The G20 leaders were also struggling to find common ground on issues such as information security, climate change and migration, said Svetlana Lukash, a Russian official helping to coordinate the meetings.

A White House official took a more positive view, saying there was a “good sense of unity in the room” between most leaders on working together on economic issues.

“China was less positive in its outlook which was in stark contrast to basically everybody else,” said the official, who spoke on condition of anonymity.

Trump, who often castigates trading partners on Twitter and at raucous political rallies, put a positive spin on trade developments.

“I appreciate the fact that you’re sending many automobile companies into Michigan and Ohio and Pennsylvania and North Carolina,” Trump told Japanese Prime Minister Shinzo Abe, who had presented him with a map showing the locations of Japanese auto investments in the United States.

Abe urged G20 leaders to send a strong message in support of free and fair trade, warning that trade and geopolitical tensions were rising and downside risks to the global economy prevailed. He also said he wanted to see momentum toward WTO reform.

Japanese and U.S. officials will meet next month to accelerate progress toward a trade deal, Economy Minister Toshimitsu Motegi told reporters after meeting Lighthizer, but added that they did not discuss a target date.

(Additional reporting by Leika Kihara, Kiyoshi Takenaka and Katya Golubkova; Additional reporting by Ben Blanchard in BEIJING; Writing by Linda Sieg in Tokyo; Editing by Clarence Fernandez, Robert Birsel and Nick Macfie)