Ceasefire on trade war
After weeks of escalating tension, China and the United States have said that they have agreed to not impose new tariffs on one another while talks continue, after reaching an initial agreement on trade. In a joint statement, both countries said that China would "significantly increase" purchases of US goods and services to reduce their trade imbalance. This was a top demand of the Trump administration during the two days of trade talks in Washington with Chinese officials. "We're putting the trade war on hold," US Treasury Secretary Steven Mnuchin said. "We have agreed to put the tariffs on hold while we try to execute the framework." Mnuchin's remarks echoed those by China Vice Premier Liu He, the top economic adviser to Chinese President Xi Jinping. He said that the two sides have pledged not to engage in a trade war, according to the state-run news agency Xinhua. Mnuchin said the countries have agreed on a trade framework. The pledge for more cooperation comes as the US and China, the two largest economies of the world, had threatened tens of billions of dollars in tariffs that could lead to a trade war. Following such a "trade ceasefire", both sides specifically agreed to "meaningful increases" in US agriculture and energy exports. Washington said that Beijing had proposed boosting Chinese purchases of American goods by around $200 billion. But, oddly enough, at a regular news briefing in Beijing, Chinese Foreign Ministry spokesman Lu Kang denied that such an offer had been made. The statement also did not mention ZTE, the Chinese tech giant that has recently been at the centre of the trade spat. Last Sunday, in a move that surprised many, the US President tweeted that he was working with Chinese President Xi Jinping to help Chinese state-controlled phone and telecom equipment maker ZTE get back into business, adding that the "Commerce Department has been instructed to get it done!" Interestingly, in March, Trump proposed tariffs on $50 billion worth of Chinese exports following a months-long investigation into IP theft, calling it a "tremendous" problem. China, in turn, had pledged retaliatory tariffs on US items like planes, cars and soybeans. Trump then raised the possibility of an additional round of tariffs worth $100 billion. Not surprisingly, China and the United States said in the latest statement that the two countries would "strengthen cooperation" on intellectual property protections and that China "will advance relevant amendments to its laws and regulations in this area." As matters stand, the statement commits neither side to any specific action, either to expand trade and investment, constrain industrial policy or not adopt penalties. So, for all practical purposes, the Americans are playing it relatively safe.