By Josh Zumbrun and Harriet Torry
WASHINGTON -- A month after calling a truce in their trade war,
the U.S. and China are struggling to come to terms on even a
limited deal, with tariffs on Chinese imports emerging as the main
stumbling block.
The logjam centers on whether the U.S. has agreed to remove
existing tariffs in the so-called "phase one" deal that the two
countries have been working toward -- or whether the U.S. would
only cancel tariffs set to take effect Dec. 15, according to people
familiar with the talks.
"The U.S. negotiators will try to exact the maximum they can
before doing anything" on tariff relief, one of the people
said.
President Trump said Tuesday that a "significant phase-one trade
deal with China could happen, could happen soon." But he added that
he is prepared to increase pressure on China if the two sides can't
reach an agreement.
"If we don't make a deal, we're going to substantially raise
those tariffs, they're going to be raised very substantially," Mr.
Trump said in a speech to the Economic Club of New York.
Mr. Trump's tone was more optimistic Oct. 11 when he met with
Chinese Vice Premier Liu in the White House and said the two
nations expected to reach a final agreement that could be signed in
"three, four or five weeks."
"These teams just don't seem capable of closing negotiations,"
said Wendy Cutler, a former senior trade negotiator in the Obama
administration and managing director of the Asia Society Policy
Institute in Washington.
The tariff fight broke into the open last week when, in a rare
public comment on the substance of the talks, China's Commerce
Ministry said the U.S. and China had both agreed to roll back their
tit-for-tat tariffs as part of the phase one deal.
The Chinese statement was contradicted later by Mr. Trump, a
strong advocate of the tariffs that at last count are generating
about $7 billion a month for the U.S. Treasury.
Others in the administration have been less enamored of tariffs,
in part because the duties are paid by U.S. businesses and
ultimately passed on to consumers.
China may have counted on that opposition in the Trump
administration and the U.S. business community in its campaign to
roll back tariffs, according to people following the talks.
U.S. trade representative Robert Lighthizer initially opposed a
move to add new tariffs on $111 billion in consumer goods on Sept.
1, the Journal reported. Yet despite those reservations, Mr.
Lighthizer sees the latest tariffs, now U.S. policy, as leverage
and isn't eager simply to eliminate them without commitments from
Beijing, according to the people familiar with the
negotiations.
A spokesman for Mr. Lighthizer didn't immediately respond to a
request for comment. A spokesperson for the Chinese embassy in
Washington didn't immediately respond to a request for comment. A
Chinese Foreign Ministry spokesman said Monday said there was
"nothing further to update" on the tariff dispute.
"The sooner China starts making the kind of structural changes
that President Trump is asking for, the better it will be for
China," said Stephen Vaughn, former top deputy to Mr. Lighthizer
and a partner at law firm King & Spalding in Washington.
The path to closing the phase one deal was also hurt by the
decision by Chile's government to cancel this week's planned
Asia-Pacific summit, the likely venue for Mr. Trump and China's
President Xi Jinping to sign an accord.
Rigid diplomatic protocol and divisive issues make it hard for
Washington and Beijing to schedule another meeting to sign the
deal, and both leaders need to be present for any pact to have
sufficient force and staying power, trade experts say.
Sen. Chuck Grassley (R., Iowa), whose farm state has been hard
hit by the trade war, said he maintains a "pretty positive" outlook
that the conflict will be resolved. Tariffs will be "one of the
last things decided because the tariffs are leverage to get other
things that we want," Mr. Grassley told reporters.
Mr. Trump has only reluctantly rolled back any significant
tariffs. One of the few examples was when Mr. Grassley and other
Republican lawmakers persuaded him to eliminate steel and aluminum
tariffs on Canada and Mexico. In September, the U.S. collected a
record $7 billion in tariffs on imports.
Still, tariff relief is the key area China has insisted on, and
the two sides in May came close to a deal that might over time have
removed all the punitive tariffs both sides had imposed. At the
time, U.S. officials blamed their Chinese counterparts for pulling
back on prior commitments.
The American side has a potentially problematic negotiating
arrangement.
Typically, U.S. presidents set policy parameters, with senior
officials working out the details. Yet under Mr. Trump senior
officials often have the latitude to seek deals and dispute over
policy themselves, with Mr. Trump making a decision at the end,
accepting or rejecting a proposal based on economic, political or
other considerations. Trade experts say that uncertainty makes it
difficult to win confidence from other side in the approach to a
deal.
"Trump isn't a closer," said a former U.S. trade official. "He
likes to keep it open -- it's more dramatic."
Lately Mr. Trump, facing impeachment and a host of Democratic
presidential challengers, has signaled he is weighing political
factors. This month he f loated Iowa as a possible site for signing
the phase one deal, which is meant to restore Chinese purchases of
American farm products.
Administration officials have worried that leading Democrats and
even Republican China hawks would criticize a deal that failed to
win structural reforms from Beijing.
Yet in the latest framework Mr. Trump would at first sign only a
phase one deal, allowing him to blunt any criticism with assurances
the issues would be addressed in future phases.
For now, both sides appear to be holding out for the best
version of phase one they can get, since the outlook for future
phases is unclear.
"They are dying to make a deal," Mr. Trump said of the Chinese
side on Tuesday, adding that "we are the ones deciding whether or
not we want to make a deal."
Bob Davis contributed to this article.
Write to Josh Zumbrun at Josh.Zumbrun@wsj.com and Harriet Torry
at harriet.torry@wsj.com
(END) Dow Jones Newswires
November 12, 2019 18:27 ET (23:27 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.