Deal Will Increase U.S. Exports to China

Posted May 19, 2018 7:43 p.m. EDT

WASHINGTON — China will increase its purchase of U.S. goods and services in order to reduce the multibillion-dollar trade imbalance with the United States, the two countries said in a joint statement Saturday.

How much the imbalance will be reduced remains to be seen.

Trump administration officials had said during negotiations last week that China was prepared to make up to $200 billion in additional purchases. Notably absent from Saturday’s announcement were any dollar figures — or a sense of the scale of the agreed-upon increases.

The White House said that China had committed to buying more agriculture and energy exports, but noted that U.S. officials would at some point go to China to work out the details of their agreement.

“To meet the growing consumption needs of the Chinese people and the need for high-quality economic development, China will significantly increase purchases of United States goods and services,” said the statement. “This will help support growth and employment in the United States.”

The Trump administration has taken a hard line against China since the president took office, and the United States has made a series of moves focused on trade, including threatening tariffs on Chinese products and restrictions on Chinese investment flowing into the country. Among the claims the United States has made is that Beijing has unfairly stolen intellectual property, especially as China pushes ahead in developing the next generation of wireless technology known as 5G.

Recently, both countries have shown a willingness to compromise to reduce trade tensions, and Chinese officials came to Washington last week for a series of talks with various Cabinet officials, including Treasury Secretary Steven Mnuchin.

The announcement Saturday made no reference to whether the Trump administration would walk away from tariffs imposed this year on roughly $50 billion of Chinese imports. But Liu He, an economic adviser who led the negotiations for China, suggested that both sides would stop recently imposed tariffs, according to China’s Xinhua News Agency.

Scott Paul, president of the Alliance for American Manufacturing, an industry group, said that judging from the announcement, the talks didn’t appear to have moved U.S. businesses toward a level playing field in China.

“Sometimes it’s better to walk away from the negotiating table to reinforce the point to China that our resolve is strong,” he said. “We need more details, but I’m not encouraged by the direction these talks are headed.”

As the negotiations this week wound down, mixed signals emerged about the progress the two sides had made.

“They are meeting many of our demands,” Larry Kudlow, director of the National Economic Council, told reporters Friday as he discussed the possibility of “at least $200 billion” in additional purchases.

Chinese media contested the concessions. The Foreign Ministry denied Friday that it had offered to reduce its trade deficit with the United States by the $200 billion amount, and on Saturday the state-run People’s Daily, considered a mouthpiece for the Chinese government, called the reports “a misunderstanding.” The trade deficit with China reached $375.2 billion last year.

U.S. officials have clashed in recent days over what to offer Beijing in return for increasing its purchases of U.S. goods and services.

One issue is whether the United States should relax export controls on certain products and technology, according to two people who were familiar with the negotiations but were not authorized to speak publicly about them. The controls determine where — and in what quantity — products with military applications or advanced technologies, like semiconductors that power smartphones and computers, can be exported to other countries.

Mnuchin, who has been leading the negotiations, has pushed for relaxing the rules to forestall the possibility of a trade war and secure China’s purchase of additional goods from the United States in the coming years. Mnuchin’s plan has faced stiff opposition from Defense Department officials, who fear such sales could compromise U.S. national security, one of the people said.

The Defense Department did not immediately respond to a request for comment, nor did the Treasury Department. Another point of contention has been whether to offer relief for ZTE, a Chinese telecom firm. The Trump administration penalized ZTE for violating U.S. sanctions against North Korea and Iran, steps that have effectively shuttered the company’s business and put tens of thousands of Chinese jobs at risk.

After taking a tough stance on China in recent months, President Donald Trump has appeared open to relaxing penalties against ZTE, posting to Twitter last weekend that too many jobs had been lost.

The comments provoked a sharp backlash from hard-liners within the administration and lawmakers across the political spectrum, who saw concessions to the Chinese on ZTE as infringing on the rule of law and potentially endangering national security.

Any breaks offered by the United States could backfire with economic nationalists, who have viewed the imposition of tariffs and investment restrictions against China as the fulfillment of one of Trump’s core campaign promises.

“It’s imperative that we do not back off one iota, and certainly not for more happy talk about continuing dialogue,” said Stephen Bannon, the president’s former chief strategist.