Tag Archives: tariffs

U.S. trade deficit hits eight-month low as Chinese imports drop

FILE PHOTO: A container ship is shown at port in Long Beach, California, U.S. July 16, 2018. REUTERS/Mike Blake

By Lucia Mutikani

WASHINGTON (Reuters) – The U.S. trade deficit fell to an eight-month low in February as imports from China plunged, suggesting President Donald Trump’s “America First” agenda was starting to bear fruit.

The surprise narrowing in the trade gap reported by the Commerce Department on Wednesday also implied a much stronger pace of U.S. economic growth in the first quarter than initially anticipated at the start of the year.

The 20.2 percent drop in imports from China was the main driver behind a nearly 3.4 percent improvement in the U.S. trade deficit to $49.4 billion, data from the Commerce Department showed. Economists polled by Reuters had forecast the trade shortfall would widen to $53.5 billion in February.

The politically sensitive goods trade deficit with China – a focus of the Trump administration’s protectionist trade policy – decreased 28.2 percent to $24.8 billion in February as U.S. exports to the world’s No. 2 economy jumped 18.2 percent.

But even with the improvement, the trade deficit remains large and February’s drop in Chinese imports could be temporary. The trade data have been volatile in recent months amid big swings between exports and imports, because of the United States’ conflicts with trading partners, including China.

Washington last year imposed tariffs on $250 billion worth of goods imported from China, with Beijing retaliating with duties on $110 billion worth of American products. Trump has delayed tariffs on $200 billion worth of Chinese imports and talks to end the trade impasse continue.

The U.S. goods trade deficit declined 1.7 percent to $72.0 billion in February, also the lowest level since last June.

When adjusted for inflation, the overall goods trade deficit fell $1.8 billion to $81.8 billion in February. The average goods trade deficit for January and February is below the fourth-quarter average. This suggests that trade could provide a boost to gross domestic product in the first quarter after being neutral in the October-December period.

SLOWING DOMESTIC DEMAND

Growth estimates for the January-March quarter are in a 1.5 percent to 2.3 percent annualized range, largely reflecting an accumulation of inventories amid slowing domestic demand. The economy grew at a 2.2 percent rate in the fourth quarter, slowing from the July-September period’s brisk 3.4 percent pace.

U.S. Treasury yields rose slightly after the release of the data. U.S. stock index futures were trading higher while the dollar was largely unchanged against a basket of currencies.

The trade deficit in February was pushed down by a 1.1 percent jump in exports to $209.7 billion. Exports of services were the highest on record.

Goods exports increased 1.5 percent to $139.5 billion in February. The surge in goods exports is a hopeful sign for global economic growth, which has showed signs of slowing in recent months.

Exports of motor vehicles and parts increased by $0.6 billion in February. Shipments of civilian aircraft soared by $2.2 billion in February. But commercial aircraft exports are likely to decline in the months ahead following Boeing’s decision to suspend deliveries of its troubled 737 MAX aircraft.

The MAX planes have been grounded indefinitely following two deadly crashes.

There was a modest increase in soybean exports.

In February, imports rose 0.2 percent to $259.1 billion. Consumer goods imports increased by $1.6 billion in February, led by a $2.1 billion rise in imports of cellphones and other household goods. Imports of industrial supplies and materials fell by $1.2 billion. Capital goods imports rose slightly.

Crude oil imports fell to 173.7 million barrels, the lowest since March 1992, from 223.1 million barrels in January. An increase in domestic production has seen the United States become less dependent on foreign oil.

Imported oil prices averaged $46.89 per barrel in February, up from $42.59 in January.

(Reporting by Lucia Mutikani; Editing by Paul Simao)

Trump: looking at economic penalty for drugs coming from Mexico

U.S. President Donald Trump holds a White House Opportunity and Revitalization Council Meeting at the White House in Washington, U.S., April 4, 2019. REUTERS/Kevin Lamarque

WASHINGTON (Reuters) – President Donald Trump said on Friday he is considering an economic penalty apart from tariffs to counter the smuggling of drugs from Mexico across the southern U.S. border.

“Likewise I am looking at an economic penalty for the 500 Billion Dollars in illegal DRUGS that are shipped and smuggled through Mexico and across our Southern Border,” Trump said in a Twitter post as he prepared to leave the White House for a two-day trip that will include a visit to the border.

Praising Mexico for moving recently against drug traffickers, Trump said, “If they continue that, everything will be fine. If they don’t we’re going to tariff their cars at 25 percent.”

“Also, I’m looking at an economic penalty for all of the drugs that are coming in through the southern border and killing our people,” Trump told reporters in Washington.

(Reporting by Doina Chiacu; Editing by Chizu Nomiyama)

U.S., China hold ‘constructive’ trade talks in Beijing

China's Vice Premier Liu He shakes hands with U.S. Treasury Secretary Steven Mnuchin as Yi Gang, governor of the People's Bank of China (PBC) and U.S. Trade Representative Robert Lighthizer stand next to them as they pose for a group photo at Diaoyutai State Guesthouse in Beijing, China March 29, 2019. Nicolas Asfouri/Pool via REUTERS

By Michael Martina and Philip Wen

BEIJING (Reuters) – U.S. officials held “constructive” talks in Beijing, Treasury Secretary Steven Mnuchin said on Friday, concluding the latest round of dialogue with China aimed at resolving the bitter trade dispute between the world’s two largest economies.

Mnuchin and U.S. Trade Representative Robert Lighthizer were in the Chinese capital for the first face-to-face meetings between the two sides since President Donald Trump delayed a scheduled March 2 hike in tariffs on $200 billion worth of Chinese goods, citing progress in negotiations.

“@USTradeRep and I concluded constructive trade talks in Beijing,” Mnuchin said on social media network Twitter.

“I look forward to welcoming China’s Vice Premier Liu He to continue these important discussions in Washington next week,” he added, but gave no details.

Earlier, he told reporters U.S. officials had a “very productive working dinner” on Thursday. He did not elaborate and it was not immediately clear with whom he had dined.

Trump imposed tariffs on $250 billion of Chinese imports last year in a move to force China to change the way it does business with the rest of the world and to pry open more of its economy to U.S. companies.

Though his blunt-force use of tariffs has angered many, his push to change what are widely viewed as China’s market-distorting trade and subsidy practices has drawn broad support.

Lobbyists, company executives, and U.S. lawmakers from both parties, have urged Trump to not settle simply for Beijing’s offers to make big-ticket purchases from the United States to help reduce a record trade gap.

LOST IN TRANSLATION?

Neither side immediately offered details on the latest talks, and the U.S. delegation was expected to leave Beijing on Friday evening without releasing a formal statement.

Mnuchin and Lighthizer greeted a waiting Liu at the Diaoyutai State Guest House just before 9 a.m. (0100 GMT), and in two brief appearances before journalists, the three mingled and joked with members of the opposite teams.

Trade watchers had anticipated the scope of this round of talks, which wrapped up about 24 hours after the U.S. delegation arrived, to be quite narrow, but that both countries hoped to signal they were working hard toward a resolution.

Reuters reported previously that the two sides were negotiating written pacts in six areas: forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers to trade.

It was unclear how much progress was made on the phrasing of those agreements, but earlier in the week a U.S. administration official told Reuters that Lighthizer and Mnuchin were “literally sitting there going through the texts”, a task typically delegated to much lower levels.

One person with knowledge of the talks said “translation is definitely an issue”, referring to discrepancies between the Chinese and English-language versions.

On Thursday, Premier Li Keqiang said Beijing would sharply expand market access for foreign banks and securities and insurance companies, fuelling speculation that China may soon announce new rules allowing foreign financial firms to increase their presence.

White House economic adviser Larry Kudlow said the United States may drop some tariffs if a trade deal is reached, while keeping others in place to ensure Beijing’s compliance.

“We’re not going to give up our leverage,” he told reporters in Washington on Thursday.

‘THERE ARE GOING TO BE PROBLEMS’

Many have expressed skepticism whether whatever deal they reach will end the trade war once and for good.

“Whatever implementation mechanism China agrees to, whether it is monthly or quarterly meetings or other check-ins, there are going to be problems,” James Green, a senior advisor at McLarty Associates who until August was the top USTR official at the embassy in Beijing, told Reuters.

“Either the purchases are going to be off, or the market access is not going to be there. And then the question is, when do you consider putting tariffs back on?” he added. “The trade issue is not going to be put to bed.”

Trump’s demands include an end to Beijing’s practices that Washington says result in the systematic theft of U.S. intellectual property and the forced transfer of American technology to Chinese companies.

U.S. companies say they are often pressured into handing over technological know-how to Chinese joint venture partners, local officials or regulators as a condition for doing business in China.

The U.S. government says technology is often subsequently transferred to, and used by, Chinese competitors.

The issue has proved tough for negotiators as U.S. officials say China has previously refused to acknowledge the problem exists to the extent alleged by the United States, making it hard to discuss resolution.

China says its laws enshrine no requirements on technology transfers, which are a result of legitimate transactions.

(Reporting by Michael Martina and Philip Wen; Additional reporting by Jeff Mason in Washington; Writing by Ben Blanchard and Tony Munroe; Editing by Shri Navaratnam and Clarence Fernandez)

Exclusive: China shifts position on tech transfers, trade talks progress – U.S. officials

Members of the U.S. trade delegation Robert Lighthizer and Steven Mnuchin arrive at a hotel in Beijing, China March 28, 2019. REUTERS/Jason Lee

By Jeff Mason

WASHINGTON (Reuters) – China has made proposals in talks with the United States on a range of issues that go further than it has before, including on forced technology transfer, as the two sides work to overcome obstacles to a deal to end their protracted trade war, U.S. officials told Reuters on Wednesday.

U.S. President Donald Trump imposed tariffs on $250 billion of Chinese imports last year in a move to force China to change the way it does business with the rest of the world and to pry open more of China’s economy to U.S. companies.

Among Trump’s demands are for Beijing to end practices that Washington alleges result in the systematic theft of U.S. intellectual property and the forced transfer of American technology to Chinese companies.

U.S. companies say they are often pressured into handing over the technological know-how behind their products to Chinese joint venture partners, local officials or Chinese regulators as a condition for doing business in China. The U.S. government says that technology is often subsequently transferred to and used by Chinese competitors.

The issue has proved a tough one for negotiators as U.S. officials say China has previously refused to acknowledge the problem exists to the extent alleged by the United States, making discussing a resolution difficult.

China says it has no technology transfer requirements enshrined in its laws and any such transfers are a result of legitimate transactions.

China has put proposals on the table in the talks that went further than any in the past, including on technology transfer, said one of four senior U.S. administration officials who spoke to Reuters.

“They’re talking about forced technology transfer in a way that they’ve never wanted to talk about before – both in terms of scope and specifics,” he said, referring to Chinese negotiators. He declined to give further detail.

Negotiators have made progress on the details of the written agreements that have been hashed out to address U.S. concerns, he said.

Reuters reported previously that the two sides were working on written agreements in six areas: forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers to trade.

“If you looked at the texts a month ago compared to today, we have moved forward in all areas. We aren’t yet where we want to be,” the official said, speaking on condition of anonymity.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin arrive in Beijing on Thursday for a new round of talks with Chinese officials to work on a deal that would end a months-long trade war that has cost both sides billions of dollars and hurt global economic growth.

The in-person talks, which will be followed by a round in Washington next week, are the first face-to-face meetings the two sides have held in weeks after missing an initial end-of-March goal for a summit between U.S. President Donald Trump and Chinese President Xi Jinping to sign a pact.

Talks would continue as long as progress is being made on the core issues, the official said.

“It could go to May, June, no one knows. It could happen in April, we don’t know,” another administration official said.

The two sides still have differences over intellectual property and how to enforce a deal, he said.

‘SOME TARIFFS WILL STAY’

China wants the United States to lift its tariffs as part of a deal. Washington, which is cognizant that the tariffs give it leverage to ensure Beijing follows through on any commitments it makes, is wary of lifting them right away.

Trump said last week the United States may leave tariffs on Chinese goods for a “substantial period” to ensure compliance.

“Some tariffs will stay,” the second official said. “There’s going to be some give on that, but we’re not going to get rid of all the tariffs. We can’t.”

The topic will be addressed in upcoming talks.

“Obviously that is an issue that we need to resolve … and will be an important part of a final deal,” the first official said. He said there was some agreement on enforcement on what he termed the “backend” once a deal was in place: a structure in which both sides could raise grievances and implement tariffs if there were violations to the agreement.

Since July 2018, the United States has imposed duties on $250 billion worth of Chinese imports, including $50 billion in technology and industrial goods at 25 percent and $200 billion in other products including furniture and construction materials, at 10 percent.

China has hit back with tariffs on about $110 billion worth of U.S. goods, including soybeans and other commodities.

The first official said the focus of talks had shifted from Chinese purchases of U.S. goods to the trickier structural issues, which he said Trump wanted as part of a “great” deal.

Bipartisan support at home for his tough stance on China as well as from the business community have emboldened Trump as he pushes for a deal that addresses long-standing complaints on trade, the source said.

Some officials have expressed concern that Trump would accept a deal involving big-ticket Chinese purchases of U.S. goods and falling short on structural issues.

“Who would he be pleasing by .. selling out?” the source said.

He expressed optimism that a deal would be reached.

“I’m still confident, but it takes time,” he said.

“Until any deal is finalized, it can always go either way. And the president has made clear, both in word and in action, that he’s going to walk away from deals if they’re not good deals.”

(Reporting by Jeff Mason; Editing by Peter Cooney, Simon Webb, Shri Navaratnam and Nick Zieminski)

Flooding woes add to trade war stress in ‘Trump country’ farm belt

A farm which was damaged by heavy flooding is pictured outside Winslow, Nebraska, U.S., March 20, 2019. Picture taken on March 20, 2019. REUTERS/Humeyra Pamuk

By Humeyra Pamuk and P.J. Huffstutter

COLUMBUS, Neb./CHICAGO (Reuters) – Nebraska grain farmer Ryan Ueberrhein was barely breaking even after the U.S.-China trade war pushed prices for his soybean crop to a decade low. Then the nearby Elkhorn River burst its banks as flooding swept across the U.S. farm belt.

Uberrhein’s farm was left covered in debris after the roiling water receded. He has mounting debts. And he is worried that President Donald Trump may not be able to strike a trade deal with China that would end tariffs on U.S. soybean exports – and allow him to sell whatever grain is left intact at a better price.

Frustration is building across farm country at what feels like a never-ending season of bad news.

The trade war “keeps damaging us,” said Ueberrhein, 34, of Valley, Nebraska, who voted for Trump. “What the president is doing, we stand by him, but … we can’t keep getting hit just because a deal can’t be made quickly.”

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are set to arrive in China this week for another round of trade talks with their Chinese counterparts. The two sides have yet to agree on many core issues.

Farmers who spoke to Reuters remained supportive of Trump.

Soybean exports to China hit a four-year low in February because of the trade war. China is the biggest buyer of U.S. soybeans, which are the largest single U.S. agricultural export. A near halt in exports has hit a rural economy already struggling after years of oversupply cut farm incomes by 50 percent in the past five years.

Debt in the agrarian economy has hit levels last seen during the U.S. farm collapse of the 1980s. (Graphic: https://tmsnrt.rs/2TkUDjk)

The Nebraska Rural Response Hotline, which provides support to farmers and ranchers, has received a record number of calls about financial distress, said John Hansen, president of the Nebraska Farmers Union. Calls about suicide and depression were up, too, he said.

The latest piece of bad news came on March 11, when the Trump administration released its 2020 budget and proposed a 15 percent cut for the U.S. Department of Agriculture, calling its subsidies to farmers “overly generous.”

It did not matter to farmers, who helped vote Trump into office, that the budget will not pass muster with Democrats who control the House of Representatives, Hansen said. Some farmers took the proposed cut to subsidies for crop insurance as an insult.

“How many times do you have to kick us when we’re down?” he said.

That insurance is crucial to Richard Oswald, who farms near Phelps City, Missouri. The flood has already swallowed his childhood home, many of his fields and more than 20,000 bushels of corn. His four grain bins have burst after water-logged corn expanded and split open.

“If our government and leaders can’t step up and start to lead, we’re done for,” he said.

For years, Oswald paid extra for flood insurance. He hoped that government talk of investing in improving U.S. infrastructure would come through – and bolster the levees and dams throughout the Midwest.

But this year, as the trade war dragged on, he dropped the policy to reduce expenses. So he will get no insurance money for the lost corn, Oswald said.

A few days ago, one of his lenders called. Oswald didn’t have to pay the loan right away, the lender said, but he would have to repay it sooner or later.

“Help needs to come from Congress, but Congress is so divided, I don’t know what’s going to happen,” Oswald said.

DISASTER DECLARATION

Trump approved a disaster declaration for Nebraska on Thursday, making federal funding available in nine counties that bore the brunt of the recent floods. On Saturday, he approved one for flood-affected counties in Iowa.

Greg Ibach, a USDA undersecretary, is touring the damage in Nebraska, and Bill Northey, another undersecretary, will head to Iowa, agency officials told Reuters.

U.S. Senator Chuck Grassley of Iowa said the farm belt states would need more aid, suggesting a separate relief bill to offer compensation to farmers for livestock killed in the floods and grains in storage that will have to be destroyed.

“The United States government has always been the insurance of last resort,” Grassley said in a phone interview on Friday.

Nebraska Governor Pete Ricketts put agricultural flood damage for the state at nearly $1 billion. Iowa officials are projecting losses of at least $1.6 billion, with at least $214 million in damage to the agriculture sector. Iowa Governor Kim Reynolds said her state would need assistance beyond what is granted through disaster declarations.

Farmers, meanwhile, are staring at waterlogged fields and expecting more floods. The U.S. National Oceanic and Atmospheric Administration said last week that the flooding would worsen in coming weeks as snow on the ground melts and water flows downstream.

Iowa farmer Dave Newby said the standing water in his fields was already threatening his planned start to corn in mid-to-late April. Newby, like many farmers, had been looking to boost his corn plantings this year because such a large volume of soybeans had been left unsold because of the trade war.

The same was the case in nearby Nebraska. Parts of flooded farmland remained under water and farmers had yet to assess the damage the piled-up sand, silt and debris caused to the soil. Almost all said planting will likely be delayed, which could lead to lower yields.

“Normal planting would take place around May 1, but I doubt we will make it,” said Kendal Sock, a cattle and corn farmer in Genoa. “I wish they’d get this trade deal done, like now.”

(Reporting by Humeyra Pamuk and P.J. Huffstutter; Additional reporting by Mark Weinraub and Tom Polansek in Chicago and Jarrett Renshaw in New York; Editing by Caroline Stauffer, David Gaffen, Simon Webb and Leslie Adler)

White House’s Hassett says progress in China trade talks-Fox Business

FILE PHOTO: Trump economic adviser Kevin Hassett gestures as he speaks during a news briefing at the White House in Washington, U.S., September 10, 2018. REUTERS/Kevin Lamarque

WASHINGTON (Reuters) – White House economic adviser Kevin Hassett said on Monday that U.S. Trade Representative Robert Lighthizer has made progress in talks with China and a deal was possible to end a dispute that has already put tariffs on hundreds of billions of dollars worth of goods.

“I think that it looks like Ambassador Lighthizer has made a lot of progress, and we might get there on China,” Hassett said in an interview with Fox Business Network.

World markets were buoyed on Monday by investors’ optimism that a trade deal could be cemented as soon as this month to resolve the ongoing trade war between the world’s two largest economies.

“I think everybody’s hopeful, as the markets are, that this is going to get to the finish line sometime soon,” Hassett told Fox, adding that details of any deal are still being worked out.

On Sunday, U.S. President Donald Trump said on Twitter that trade talks were progressing well and that he had asked China to immediately remove all tariffs on U.S. agricultural products while delaying his own plan to impose 25 percent tariffs on Chinese goods.

A summit between Trump and his Chinese counterpart Xi Jinping could occur around March 27 to finalize a deal, the Wall Street Journal reported on Sunday, citing a source briefed on negotiations.

A representative for the White House said they had no comment on the ongoing negotiations.

(Reporting by Doina Chiacu, Susan Heavey and Steve Holland; Editing by Chizu Nomiyama and Jeffrey Benkoe)

Trump delays tariff hike on Chinese goods, citing trade talk progress

By Jeff Mason and David Lawder

WASHINGTON (Reuters) – President Donald Trump said on Sunday he would delay an increase in U.S. tariffs on Chinese goods thanks to “productive” trade talks and that he and Chinese President Xi Jinping would meet to seal a deal if progress continued.

The announcement was the clearest sign yet that China and the United States are closing in on a deal to end a months-long trade war that has slowed global growth and disrupted markets.

Trump had planned to raise tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports into the United States if an agreement between the world’s two largest economies were not reached by Friday.

After a week of talks that extended into the weekend, Trump said those tariffs would not go up for now. In a tweet, he said progress had been made in divisive areas including intellectual property protection, technology transfers, agriculture, services and currency.

As a result, he said: “I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!”

Mar-a-Lago is the president’s property in Florida, where the two men have met before.

The president did not set a new deadline for the talks to conclude, but he told U.S. state governors gathered at the White House that there could be “very big news over the next week or two” if all went well in the negotiations.

The White House did not provide specific details on the kind of progress that had been made.

The Chinese government’s top diplomat, State Councillor Wang Yi, told a forum in Beijing on Monday that the talks had made “substantive progress”, providing positive expectations for the stability of bilateral ties and global economic development, China’s Foreign Ministry said.

China’s official Xinhua news agency said in a commentary that the goal of an agreement was getting “closer and closer”, but also warned that negotiations would get more difficult as they approached the final stages.

“The emergence of new uncertainty cannot be ruled out, and the long-term nature, complexity, and difficulty of China-U.S. trade frictions must be clearly recognized,” Xinhua said.

Trump and Xi called a 90-day truce last year to give their advisers time to negotiate a deal. The threat of tariff increases represented significant leverage for the Trump team as Beijing is trying to stabilize China’s cooling economy.

“We can’t be sure whether this constitutes a major cave or success because we don’t know the details of what has been negotiated. But … agreeing to extend negotiations a few more weeks definitely is in China’s interests,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies in Washington.

“At this point, the U.S. has likely gotten all it’s going to get out of China.”

J.P. Morgan Asset Management market strategist Tai Hui said the move suggested both sides wanted a settlement of the dispute and added that further tariff escalation would have added to concerns about the U.S. growth outlook.

Markets, which have been sensitive to the dispute as it has slowed global growth, and some U.S. trade associations cheered Trump’s move.

U.S. equity index futures opened higher on Sunday evening as trading kicked off for the week. S&P 500 e-mini futures ticked higher after Trump’s tweets on trade, suggesting Wall Street would open on positive footing on Monday morning.

Asian shares scaled a five-month high and the Australian dollar, a proxy for China investments, got a 0.4 percent lift from the news. [MKTS/GLOB]

Chinese stocks and the yuan jumped at the start of trade, with the benchmark Shanghai Composite index up 2.1 percent, its highest since Aug. 1, and the yuan hit its strongest level against the dollar since July.[.SS]

Trump leaves on Monday for Vietnam, where he will hold a summit with North Korean leader Kim Jong Un. The president, who faces a re-election battle next year, has portrayed his engagement with Kim and forcefulness with China as key successes of his presidency.

ENFORCEMENT STICKING POINT

Trump said on Friday there was a “good chance” a deal would emerge. But his lead trade negotiator, U.S. Trade Representative Robert Lighthizer, emphasized then that some major hurdles remained. Lighthizer has been a key voice in pushing China to make structural reforms.

China’s negotiators stayed for the weekend and the two sides discussed the thorny issue of how to enforce a potential trade deal on Sunday, according to a person familiar with the talks. Tariffs and commodities were also on Sunday’s agenda, he said.

Negotiators have been seeking to iron out differences on changes to China’s treatment of state-owned enterprises, subsidies, forced technology transfers and cyber theft.

Washington wants a strong enforcement mechanism to ensure that Chinese reform commitments are followed through to completion, while Beijing has insisted on what it called a “fair and objective” process. Another source briefed on the talks said that enforcement remained a major sticking point as of Saturday.

Reuters reported on Wednesday that both sides were drafting memorandums of understanding (MOUs) on cyber theft, intellectual property rights, services, agriculture and non-tariff barriers to trade, including subsidies.

Trump said he did not like MOUs because they are short-term, and he wanted a long-term deal. That sparked a back-and-forth with Lighthizer, who argued that MOUs were binding contracts, before saying they would abandon the term altogether going forward.

The source familiar with the talks played down the apparent tension between the top trade negotiator and the president, saying Trump, a former New York businessman, had viewed MOUs from a real estate perspective, while Lighthizer had done so from a trade perspective. There was no daylight between the two men, the source said.

At the White House event with governors on Sunday, Trump said Lighthizer was doing a “fantastic” job.

(Reporting by Jeff Mason and David Lawder; Additional reporting by Rajesh Kumar Singh, Sarah N. Lynch and Howard Schneider in Washington; Josh Horwitz in Shanghai; and Michael Martina and Ben Blanchard in Beijing; Editing by Peter Cooney & Kim Coghill)

U.S., China haggle over toughest issues in trade war talks

U.S. Trade Representative Robert Lighthizer (2ndL), Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross (Top-L) pose for a photograph with China's Vice Premier Liu He (2ndR), Chinese vice ministers and senior officials before the start of US-China trade talks at the White House in Washington, U.S., February 21, 2019. REUTERS/Joshua Roberts

By Jeff Mason and David Lawder

WASHINGTON (Reuters) – Top U.S. and Chinese trade negotiators haggled on Thursday over the details of a set of agreements aimed at ending their trade war, just one week before a Washington-imposed deadline for a deal expires and triggers higher U.S. tariffs.

Reuters reported exclusively on Wednesday that the two sides are starting to sketch out an agreement on structural issues, drafting language for six memorandums of understanding on proposed Chinese reforms.

If the two sides fail to reach an agreement by March 1, U.S. tariffs on $200 billion worth of Chinese imports are set to rise to 25 percent from 10 percent. Tit-for-tat tariffs between the world’s two largest economic powers have disrupted international trade and slowed the global economy since the trade war started seven months ago.

Negotiators have struggled this week to overcome differences on specific language to address tough U.S. demands for structural changes in China’s economy, two sources familiar with the talks said. The issues include an enforcement mechanism to ensure that China complies with any agreements.

“It’s not surprising that this week has been more challenging,” said an industry source familiar with the talks. “Once you move from putting together outlines to filling out the details, that is where things would naturally become more challenging.”

Chinese officials did not answer questions as they left the U.S. Trade Representative’s office on Thursday evening after more than nine hours of talks on Thursday.

The discussions began with a photo opportunity where U.S. Trade Representative Robert Lighthizer and Chinese Vice Premier Liu He faced each other silently across a table in the Eisenhower Executive Office Building next door to the White House.

U.S. President Donald Trump will meet with Liu at the Oval Office on Friday, the White House said late on Thursday. The two also met at the end of talks during Liu’s last visit to Washington in late January.

Trump, who has embraced an “America First” policy as part of an effort to rebalance global trade, has said the March 1 deadline could be extended if enough progress is made.

Sources familiar with the negotiations told Reuters the memorandums would cover forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers to trade.

The two sides remain far apart on demands by Trump’s administration for China to end practices on those issues that led Trump to start levying duties on Chinese imports in the first place.

Chinese President Xi Jinping would need to undertake difficult structural economic reforms to meet U.S. demands. The United States is offering no real concessions in return, other than to remove the tariff barriers Trump has imposed to force change from China.

PEN TO PAPER

One of Trump’s demands that is easier to fix for Beijing is to reduce the trade imbalance between the two nations. The U.S. trade deficit with China reached a record $382 billion through the first 11 months of 2018.

The two sides have reached consensus on how to alleviate the trade imbalances, several Chinese government sources said. Washington and Beijing are looking at a 10-item list for that, including additional Chinese purchases of agricultural produce, energy and goods such as semiconductors.

U.S. Agriculture Secretary Sonny Perdue called China’s pledges to purchase U.S. agricultural produce premature.

“Those proposals are all contingent upon a grand deal,” he said on the sidelines of the U.S. Department of Agriculture’s annual forum in Washington.

“The real issue is structural reforms regarding intellectual property, enforceability of those types of provisions.”

The United States could quickly recover its lost agricultural markets in China if a deal is struck, he said.

Perdue has overseen $12 billion in federal aid to U.S. farmers for losses they have sustained because of the trade war. China had all but halted purchases of U.S. soybeans, which were the single biggest U.S. agricultural export, worth around $12 billion in 2017.

(Reporting by Jeff Mason and David Lawder; Additional reporting by Rajesh Kumar Singh, Humeyra Pamuk in Washington, Chris Prentice in New York and Michael Martina in Beijing; writing by Simon Webb; editing by Paul Simao, Richard Chang and Grant McCool)

New round of U.S.-China trade talks to begin in Washington on Tuesday

Aides set up platforms before a group photo with members of U.S. and Chinese trade negotiation delegations at the Diaoyutai State Guesthouse in Beijing, China February 15, 2019. Mark Schiefelbein/Pool via REUTERS

WASHINGTON (Reuters) – A new round of talks between the United States and China to resolve their trade war will take place in Washington on Tuesday, with follow-up sessions at a higher level later in the week, the White House said.

The talks follow a round of negotiations that ended in Beijing last week without a deal but which officials said had generated progress on contentious issues between the world’s two largest economies.

The talks are aimed at “achieving needed structural changes in China that affect trade between the United States and China. The two sides will also discuss China’s pledge to purchase a substantial amount of goods and services from the United States,” the White House said in a statement.

The higher-level talks will start on Thursday and be led by U.S. Trade Representative Robert Lighthizer, a strong proponent of pressing China to end practices that the United States says include forced technology transfers from U.S. companies and intellectual property theft.

China, which denies that it engages in such practices, confirmed that Vice Premier Liu He will visit Washington on Thursday and Friday for the talks.

The White House said Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, economic adviser Larry Kudlow and trade adviser Peter Navarro would also take part in the talks.

U.S. tariffs on $200 billion in imports from China are set to rise to 25 percent from 10 percent if no deal is reached by March 1.

Trump, who suggested last week that he could extend the deadline for the talks, reiterated in a speech on Monday that the negotiations had been fruitful.

“We’re making a lot of progress. Nobody expected this was going to be happening,” he told a crowd in Florida.

Speaking in Beijing on Tuesday, the Chinese government’s top diplomat, State Councillor Wang Yi, told a visiting U.S. business delegation that everyone was “paying attention” to the talks.

“If our two countries can respect each other and cooperate it will not only be the right choice for us but it is also the common hope of international society,” Wang told the group, which included U.S. Chamber of Commerce Executive Vice President Myron Brilliant and former U.S. deputy secretary of the treasury Robert Kimmitt.

Brilliant said that in the last year or so there had been “serious discussions about economic issues”.

“We are hopeful that the two sides will reach a comprehensive, bold and significant trade agreement that will be enduring and long-lasting. This is the challenge for both governments.”

(Reporting by Jeff Mason in WASHINGTON and Ben Blanchard and Lusha Zhang in BEIJING; Editing by Paul Tait)

Explainer: What’s at stake in U.S.-China trade talks

U.S. Treasury Secretary Steven Mnuchin, second from left, U.S. Trade Representative Robert Lighthizer, third from left, and Chinese Vice Premier and lead trade negotiator Liu He, second from right, pose for a photo before the opening session of trade negotiations at the Diaoyutai State Guesthouse in Beijing, Thursday, Feb. 14, 2019. Mark Schiefelbein/Pool via REUTERS

WASHINGTON (Reuters) – U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin are in Beijing this week as Chinese and American negotiators try to hammer out a trade deal to ease a trade war and avert an increase in U.S. tariffs on Chinese goods scheduled for March 2.

The governments of the world’s two largest economies have been locked in a tit-for-tat tariff battle for months as Washington presses Beijing to address long-standing concerns over Chinese practices and policies around industrial subsidies, market access and intellectual property rights protections.

Here is a look at the key issues in the talks and their implications:

WHAT ARE WASHINGTON AND BEIJING FIGHTING ABOUT?

After years of steadily rising U.S. trade deficits with China and U.S. complaints that Beijing has systematically obtained American intellectual property and trade secrets through coercion and outright theft, the Trump administration last year demanded fundamental changes to China’s economic model to allow U.S. companies to compete on a more level playing field. These include an end to policies that Washington claims effectively force U.S. companies to transfer their technologies to Chinese partners and full protection for American intellectual property rights.

WHAT’S AT STAKE?

At the most basic level, a dominant position in future high-technology industries, according to the U.S. Trade Representative’s office. China is determined to upgrade its industrial base in 10 strategic sectors by 2025, including aerospace, robotics, semiconductors, artificial intelligence and new-energy vehicles. U.S. officials say they do not have a problem with China moving up the technology ladder, but they do not want it to happen with stolen or unfairly obtained American know-how. They argue that China’s massive support for state-owned enterprises is leading to overproduction, making it hard for U.S. companies to compete on a market-driven basis.

HOW DOES BEIJING VIEW THESE COMPLAINTS?

Chinese officials generally view the U.S. actions as a broad effort to thwart the Asian country’s inevitable rise to a dominant position in the global economy. They deny that China requires or coerces technology transfers, saying that any such actions are commercial transactions between American and Chinese firms. At the same time, China is looking to make a deal with President Donald Trump to ease U.S. tariffs on Chinese goods and to directly reduce the trade imbalance between the world’s two largest economies through increased purchases of U.S. goods, including soybeans and energy. Beijing has also taken some steps to open up to more imports, including lowering tariffs on imported cars and allowing foreign companies in some sectors to own a majority of their operations in China.

WHAT ACTIONS HAS THE UNITED STATES TAKEN?

Trump has imposed punitive tariffs on $250 billion worth of imported goods from China so far – a 25 percent duty on $50 billion worth of machinery, semiconductors and other technology-related products, and 10 percent tariffs on a broader, $200 billion range of goods that includes many chemicals, building materials, furniture and some consumer electronics. Thus far, Trump has spared many consumer goods, including cellphones, computers, clothing and footwear from tariffs. But if no deal is reached by March 2, the United States is scheduled to raise tariffs on the $200 billion in goods from China to 25 percent from 10 percent. Trump said on Wednesday that a delay was possible.

HAS CHINA RETALIATED?

Yes. China has imposed tariffs of 25 percent on $50 billion worth of U.S. goods, including soybeans, beef, pork, seafood, whiskey, ethanol and motor vehicles. Beijing also has imposed tariffs of 5 percent to 10 percent on another $60 billion worth of U.S. goods, including liquefied natural gas, chemicals, frozen vegetables and food ingredients. So far, Beijing has spared imports of U.S. commercial aircraft largely made by Boeing Co. Since Trump and Chinese President Xi Jinping agreed in December to pursue the current round of talks, China has also suspended tariffs on U.S.-made autos and has resumed some purchases of U.S. soybeans.

WHAT HAS HAPPENED IN THE TALKS SO FAR?

China has pledged to make its industrial subsidy programs compliant with World Trade Organization rules and nondistortive to markets, but has offered no details on how it will achieve this, sources told Reuters. It’s unclear if that will be enough to satisfy U.S. negotiators, but that indicates China may be willing to address those American concerns.

The two sides seemed far apart on industrial subsidies and forced technology transfer when they met in late January, though they indicated some progress had been made around intellectual property rights issues.

A key U.S. demand is creating a mechanism for regular reviews of China’s progress on following through on any reform pledges that it makes, a plan that would maintain a perpetual threat of U.S. tariffs.

China has also offered to make purchases of over $1 trillion worth of goods over the next six years, including of agricultural and energy products as well as industrial goods.

WILL U.S. OFFICIALS ACCEPT A DEAL BASED MAINLY ON PURCHASES?

Trump has been optimistic about a deal, saying on Wednesday that the talks were going “very well”. But he indicated in his State of the Union address on Feb. 5 that big spending by China on American goods would not be enough for a deal. Any new trade deal with China “must include real, structural change to end unfair trade practices, reduce our chronic trade deficit and protect American jobs,” he said in the address.

The president’s advisers say he will not soften his demands that China make structural reforms on intellectual property and related issues. The United States rebuffed some initial offers by China last spring to increase purchases of U.S. goods, choosing instead to proceed with tariffs.

WHAT ARE POSSIBLE OUTCOMES OF THIS WEEK’S TALKS?

The two sides could report some progress toward a deal and may extend the March 2 deadline to keep negotiating, as often happened during talks last year to replace the North American Free Trade Agreement, or NAFTA. A stalemate on core structural issues would be viewed as a negative sign, and investors would brace for higher tariffs. Trade negotiations often go down to the wire, so a final outcome is not likely before the end of February, and any agreement will need the approval of Trump and Xi. The two presidents have no meeting planned before the March deadline.

(Reporting by David Lawder; Additional reporting by Chris Prentice; Editing by Jonathan Oatis)