Trade war is over, says China as it promises US shopping spree

Beijing offers concessions on trade gap after Trump's tariffs threat

Tensions between the US and China escalated earlier in the year but appear to be subsiding after Beijing offered to help reduce its trade surplus with America. Mark Schiefelbein/AP

China will “significantly increase purchases” of US goods, the White House said as Beijing’s special envoy at talks in Washington declared a trade war had been averted between the world’s two largest economies.

A joint statement released by the White House following the talks didn’t place a dollar figure on the increased purchases by China, or address a comment by President Donald Trump’s top economic adviser suggesting Beijing had agreed to slash its annual trade surplus with the US by $200 billion (Dh734bn).

Vice Premier Liu He, a special envoy of China’s President Xi Jinping, told reporters in Washington that talks with 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, according to a Xinhua news agency report.

Mr Liu said both sides agreed to stop “slapping tariffs” on each other and called his visit “positive, pragmatic, constructive and productive,” Xinhua reported. Cooperation will be enhanced in such areas as energy, agriculture, health care, high-tech products and finance, a “win-win” choice for both nations. The statement said China agreed to “meaningful increases in US agriculture and energy exports” with details to be worked out later.

While there’s still a long way to go in terms of specifics, the announcement that that a trade war will be averted should boost global stocks Monday, according to Shane Oliver, head of investment strategy at AMP Capital Investors Ltd. in Sydney.

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“Investors had been fretting,” Mr Oliver said. “U.S. energy, agriculture, manufacturing and services companies with significant exposure to exports to China will be key beneficiaries. But it’s also a big positive across Asia given supply chain linkages to Chinese companies that ultimately export to the US”

“There was a consensus on taking effective measures to substantially reduce the US 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 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.

“This round of talks is generally positive,” said Li Yong, a senior fellow at the China Association of International Trade in Beijing, adding that the US still may take a harder line on reviews of Chinese investments. “Trade tensions will ease gradually, but there still could be frictions.”

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 $200bn. “The number’s a good number,” he said.

Earlier, posts on Chinese state social media disputed a report that China planned to slash its trade surplus by the extent demanded by Washington through increased imports of US products. A foreign ministry official also played down the suggestion.

In a sign that the Chinese government seeks a conciliatory stance, it said Friday it ended an anti-dumping and anti-subsidy investigation into imports of US sorghum, citing “public interest.” That move came days after it restarted a review of Qualcomm’s application to acquire NXP Semiconductors.

A $200bn reduction in the U.S. trade gap with China by 2020 was on a list of demands the US made earlier this month as Mr Mnuchin led a delegation to Beijing. That mission left with little common ground with China and reports emerging of infighting among the US officials. The US merchandise trade deficit with China hit a record $375bn last year.

Trump’s administration has threatened to impose tariffs on as much as $150bn of Chinese imports to the US as tensions over trade have escalated. Trump expressed doubt before his meeting with Liu that China and the US would come to an agreement to avoid a damaging trade war.

The statement didn’t mention ZTE, the Chinese telecom company that Trump a week ago ordered the Commerce Department to get help back into business, reversing a ban on accessing American technology that would have effectively put it out of business.

Mr Kudlow said Friday that ZTE may need to change its management to win a reprieve from US sanctions that shut it off from key parts suppliers.