US-China 'phase one' trade deal to be postponed until next year

Completion of a partial trade deal between the US and China will likely be postponed to next year, as Beijing presses for more extensive tariff rollbacks and Washington counters with more demands of its own, according to trade experts and people close to the White House

US President Donald Trump announced in October that his administration had reached a tentative agreement for the first phase of a trade deal, with China.

Just over a month later, however, a deal is still elusive, and negotiations may be getting more complicated, trade experts and people briefed on the talks told Reuters this week.  

Asked Wednesday by reporters in Texas about the status of the China deal, Trump said “I don’t think they’re stepping up to the level that I want.”

A person briefed on the matter said that Trump and US Trade Representative Robert Lighthizer recognize that removing tariffs for a deal that fails to resolve intellectual property and technology transfer issues will not be a good deal for the United States.

China’s Vice Premier Liu He, who is chief negotiator at the Sino-US trade talks, said Wednesday that he was “cautiously optimistic” on a phase one deal, Bloomberg News reported.

Liu also said he was “confused” about the US demands, but was confident the first phase of a deal could be completed nevertheless, Bloomberg added.

“If talks are really going well, that [tariff[ hike will be suspended. If not, the US will implement them and that will throw the game into next year,” said Christian Whiton, a trade expert at the Center for the National Interest, and an adviser in the administration of former President George W. Bush.

US stocks extended their fall Wednesday on the potential delay, with the S&P down 0.8%, while Treasury yields dropped and the dollar pared gains.

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The months-long protests in Hong Kong may also complicate the deal’s completion. The Hong Kong crisis is definitely a negative factor in the trade talks, Zhang Yansheng, principal researcher at the state-affiliated think-tank China Center for International Economic Exchanges, said at the Bloomberg forum on Thursday.

The US Senate passed a bill on Tuesday condemning the  and pledging support for Hong Kong, which was immediately criticized by Beijing.

Despite some optimistic comments about the trade talks, Chinese pundits say they are pessimistic about a deal.

“Few Chinese believe that China and the US can reach a deal soon,” Hu Xijin, the editor of the state-backed Chinese tabloid Global Times, said on Twitter on Wednesday.

“China wants a deal but is prepared for the worst-case scenario, a prolonged trade war,” Hu added.

Since early 2018, the United States has pursued a deliberate policy of attempting to hurt China’s economy in response to concerns about the shifting balance of economic power and unfair trade practices.

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