Trump may again delay China tariff escalation

The US may again delay the scheduled increase in tariffs on imports from China if negotiators from the two countries make progress on a broader trade deal, President Donald Trump said today.

US tariff rates on $200bn/yr of imports from China are scheduled to increase to 25pc from 10pc on 2 March. "If we are close to a deal where we think we can make a real deal and it is going to get done, I could see myself letting that slide for a little while," Trump told reporters following a Cabinet meeting at the White House.

Chinese and US negotiators began meetings in Beijing yesterday for another round of talks to prevent an escalation in the ongoing trade war. US treasury secretary Steven Mnuchin and trade representative Robert Lighthizer will join the talks tomorrow. The US delegation includes representatives from key government agencies, including assistant energy secretary for fossil energy Steven Winberg.

"I want it to be a real deal, not just a deal that cosmetically looks good for a year. We have a chance to really make a deal, a real deal with China," Trump said.

The proposed delay in the tariff hike — originally scheduled for 1 January but delayed to allow time for negotiations — may reflect Trump's preference for personally sealing an agreement with his Chinese counterpart, Xi Jinping.

Trump will visit Vietnam on 27-28 February for a meeting with North Korea's leader Kim Jong-un. Trump previously said a meeting with Xi was a possibility around the same time, but Beijing seems to be waiting on the outcome of trade discussions first.

"At some point, I expect to meet with President Xi, who I have a lot of respect for and like a lot, and make the parts of the deal that the group is unable to make. That is the way deals happen," Trump said.

The main obstacle at the moment is so-called structural issues — Washington's insistence on guarantees to cut the US trade deficit, implement stronger IP protections and end forced technology transfers. Washington has extracted a commitment from Xi to buy more soybeans, and is pushing for similar pledges to increase imports of energy commodities from the US.

A narrow agreement negotiated by Mnuchin and Chinese vice premiere Liu He last May fell apart, leading to three rounds of tariffs imposed by Washington and Beijing. US and Chinese tariffs already in place affect about half of US imports from China and 85pc of China's imports from the US.

The trade war with China cut off a growing market for US oil and LNG exports in the second half of 2018. China took a small amount of US crude in November — a total of 250,000 bl for the month or 8,300 b/d — after exports stopped in the previous three months, US government data show. By comparison, China took an average of 377,000 b/d of US crude in January-July 2018 and was consistently the first or second top destination for US crude.

The scheduled escalation of tariffs is seen as weighing on global economic growth that drives crude demand. The IMF economic growth projections for China and the US — at 6.2pc and 2.5pc respectively for this year — incorporate the scheduled hike to 25pc. The IMF said it could revise the forecasts higher if the tariffs stay at current levels.