scorecardresearch Skip to main content

Hopes rise that lifting tariffs could allow US-China accord

Workers on the floor of the New York Stock Exchange on Thursday.AP/Associated Press

WASHINGTON — The United States and China have agreed that an initial trade deal between the two countries would roll back a portion of the tariffs placed on each other’s products, a significant step toward defusing tensions between the world’s two largest economies.

The so-called “phase one” agreement has not been finalized, and a deal could fail to materialize as it has in previous rounds of negotiations. But if a pact is reached, the Trump administration has committed to rolling back some tariffs, according to people familiar with the negotiations.

The commitment marks the first time the United States has agreed to remove any of the tariffs it has placed on $360 billion worth of Chinese goods. While President Trump canceled a planned tariff increase in October, he has routinely dangled the prospect of additional tariffs if Beijing does not change its economic practices and accede to America’s trade terms.

The development suggests the two sides are moving closer to a deal that would provide relief to businesses and consumers that have struggled with the additional costs of tariffs. Trump and his Chinese counterpart, Xi Jinping, are facing increasing political and economic pressure to resolve their 19-month trade fight, which has inflicted pain on both sides of the Pacific.

Investors have already begun anticipating some type of resolution. Stocks soared Thursday after the Chinese government said Beijing and the Trump administration had agreed to remove some tariffs as part of any deal.

Supporters say an agreement that rolls back only some tariffs would constitute a political victory for the president, who can claim he forced China to open its markets and buy more American agricultural goods while retaining leverage in future negotiations.

But Trump faces internal divisions, with his more hawkish advisers warning that removing tariffs without more substantial commitments from China to end its problematic behavior will do little to resolve US concerns and amount to a capitulation.

“President Trump’s tariffs are the centerpiece of his confrontation with the Chinese Communist Party — and they have worked brilliantly, forcing the Chinese to the table,” said Steve Bannon, the president’s former chief strategist. “Now, China is trying to re-trade the president and remove the tariffs.”

Gao Feng, a spokesman for China’s Commerce Ministry, said at his weekly news conference in Beijing that China was insisting that any deal include tariff reductions and that the United States had agreed to remove tariffs as part of an agreement.

“In the past two weeks, the leaders of the two sides have conducted a serious and constructive discussion on properly addressing the concerns of both sides, and agreed to cancel the tariffs by stages in accordance with the development of the agreement,” he said.

Gao did not specify what tariffs might be dropped, or when.

Last month, Trump said he would drop his plan to increase tariffs to 30 percent on Oct. 15 as part of a first-phase trade deal, but made no mention of the tariffs he had already placed on more than $360 billion of Chinese products.

Since then, the United States has begun considering rolling back tariffs put in place Sept. 1 on more than $100 billion of Chinese food, clothing, lawn mowers and other products, according to people briefed on the discussions.

Markets, which Trump pays close attention to, are increasingly optimistic about the chances for a deal and have been rising steadily. Shares of companies with close ties to China’s vast manufacturing base, such as semiconductor manufacturers and retailers, also rose.

While markets are booming, farm and manufacturing states continue to struggle under the weight of Trump’s trade war, which has included retaliatory tariffs on US goods.

The fight has brought the economies of several farm belt states to a near-standstill, data released by the Commerce Department on Thursday showed. From the middle of 2018 through the middle of this year, growth in Iowa, Kansas, and Nebraska slowed to less than 1 percent for the year, well below the more rapid expansions they had enjoyed in the first half of 2018.

In the second quarter of this year, which ran from April to June, gross domestic product rose by an annual rate of just 1.1 percent in Wisconsin, Michigan, Iowa, Illinois, and Georgia.

While the Trump administration has insisted that Americans are not bearing the brunt of the tariffs, business and farmer groups disagree. The lobbying group Tariffs Hurt the Heartland released a report this week that found US consumers and businesses have paid an additional $38 billion in tariffs between February 2018 and September 2019 as a result of the trade war.