U.S., China Call Truce in Trade War

December 03, 2018 at 12:11 AM

The U.S. and China have to freeze tariffs on each other’s goods for the next three months.

The Saturday decision at the G20 Summit in Buenos Aires between Presidents Donald Trump and Xi Jinping postpones the Trump administration’s plan to hike tariffs on $200 billion worth of Chinese goods from the current 10% to 25% on Jan. 1.

In return, China says it will take steps to reduce its trade surplus with the U.S. by increasing its purchase of U.S. farm, energy and industrial products by unspecified amounts.

In announcing the agreement on Saturday, neither country mentioned any changes to import tariffs they charge on each other’s vehicles. But last night President Donald Trump tweeted that China had agreed to “reduce and remove” its 40% taxes on American-made vehicles. China did not immediately confirm that statement.

In July, the U.S. raised its import tax on Chinese cars to 27.5% from 2.5%. China promptly responded by increasing its 15% tariff on American-made cars to 40%.

Trump says he will move ahead with the 25% tariffs on $200 billion in Chinese goods if negotiations over the next three months fail to produce meaningful reforms in China’s non-tariffs barriers, theft of intellectual property and rules that force U.S. businesses to reveal technology secrets in return for the right to do business in the country. It isn’t clear if that amount would be in addition to the current 27.5% rate for cars.

The economic cease fire, regarded as more political than economic, has given both countries the ability to claim victory. It also buoyed investors, who have been looking for signs that the escalating trade war might ease.

But analysts describe the three-month deadline as highly optimistic. They point out that the two countries issued significantly different descriptions of Saturday’s agreement. They also note that the nations have failed to produce results over the White House complaints in talks that date to China joining the World Trade Organization 17 years ago.