US, China decide to put trade war on hold for now

The world’s largest economies – US and China – have decided to put “on hold” an evolving trade war as the two agreed to drop their tariff threats while they work on a wider trade agreement.

US Treasury Secretary Steven Mnuchin and US President Donald Trump’s top economic adviser, Larry Kudlow, said the agreement reached by Chinese and American negotiators on Saturday set up a framework for addressing trade imbalances in the future.

“We are putting the trade war on hold. Right now, we have agreed to put the tariffs on hold while we try to execute the framework,” Mnuchin said in a television interview on “Fox News Sunday.”

On Saturday, China agreed to import more energy and agricultural commodities from the United States to narrow the $335 billion annual US goods and services trade deficit with China even as Beijing and Washington decided to keep talking about measures to achieve a desirable trade balance.

While there is no specific deal, China has agreed to “significantly increase purchases” of US goods, the White House said as Beijing’s special envoy at the trade talks in Washington declared a trade war has been averted between the world’s two largest economies.

A joint statement released by the White House on Saturday did not quantify the increased purchases promised by China, or make any comments on earlier reports suggesting Beijing had agreed to slash its annual trade surplus with the US by $200 billion.

A Xinhua news agency report quoting Chinese vice premier Liu He, a special envoy of China’s President Xi Jinping, said that talks with US officials, including Treasury Secretary Steven Mnuchin, Secretary of Commerce Wilbur Ross and US Trade Representative Robert Lighthizer, ended with a pledge not to engage in a trade war.

Liu said the two sides agreed to stop “slapping tariffs’ on each other, adding that his trip to the US had been positive, pragmatic, constructive and productive, Xinhua reported. Trade cooperation would be enhanced in such areas as energy, agriculture, health care, high-tech products and finance, a “win-win” choice for both nations.

China agreed to “meaningful increases in US agriculture and energy exports,” the White House said, adding that the US will send a team to China to work out the details.

Tension between the two sides has been growing since the Trump administration proposed tariffs of $50 billion on Chinese goods and vowed to extend levies to an additional $150 billion. China responded with similar measures targeting US agriculture.

Democratic Senator Chuck Schumer of New York, a frequent Trump critic, said he thought it would be a mistake for Trump to settle for “a promise to buy goods” with so many larger issues on the table.

“If President Xi is going...to fail to take strong actions on intellectual property, cyber theft, and American companies having free access to sell goods in China...we will have lost,” Schumer said.

“There was a consensus on taking effective measures to substantially reduce the United States trade deficit in goods with China,” the White House said.

The delegations also discussed expanding trade in manufactured goods, and each side agreed to strengthen cooperation on intellectual property. China will “advance relevant amendments” to its laws and and regulations in that area, including its patent law, the White House said.

The White House joint statement didn’t mention additional US demands, including a halt to subsidies and other government support for the Made in China 2025 plan that targets strategic industries from robotics to new-energy vehicles. China had made its own demands, including giving equal treatment to its investment, and warned US companies may be excluded from measures to open its economy.

On Friday morning, Larry Kudlow, director of the National Economic Council, told reporters that China had offered to reduce its annual trade surplus with the US by “at least $200 billion.”

Kudlow later told CBS `Face the Nation’ that it was too soon to lock in the $200 billion figure for China’s promised purchases. “The details will be down the road. These things are not so precise,” he said.

In addition, he told ABC’s “This Week” that the broader issues were still in play, and that China had “structural reforms” such as lowering tariffs and non-tariff barriers that will allow the United States to boost exports.

Trump was in a “very positive mood about this,” Kudlow said.

However, he said there was no trade deal yet reached.

“The number’s a good number,” Kudlow said outside the White House.