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Trade war

China wants immediate end to tariffs, but US opposed

Remaining sticking points to potentially delay Trump-Xi deal until April

Workers transport soybeans at a Chinese port. Beijing levied retaliatory tariffs on U.S. soybeans last year.    © Reuters

BEIJING/WASHINGTON -- The U.S. and China are apparently at odds over the lifting of punitive tariffs, with Beijing insisting on an immediate removal upon reaching a trade agreement and Washington seeking to preserve some as future leverage.

Chinese Vice Commerce Minister Wang Shouwen stressed Saturday that the extra tariffs should be lifted if the two sides resolve remaining issues, including rectifying trade imbalances and protecting intellectual property.

"We agreed at the summit last December to work toward mutually eliminating all additional tariffs," Wang told reporters Saturday, referring to the meeting between U.S. President Donald Trump and Chinese President Xi Jinping in Argentina.

But China hawks in the Trump administration, including U.S. Trade Representative Robert Lighthizer, are seeking a gradual reduction to ensure that Beijing is keeping to its end of the trade deal. This and other remaining sticking points could potentially delay until April a Trump-Xi summit where the two leaders are slated to ink a final deal.

The U.S. and China imposed additional tariffs of up to 25% on certain products from July to September of last year. The U.S. has raised tariffs on half of its Chinese imports by value, while China has done so for 70% of its imports from the U.S. Their immediate lifting would be a boon to China-U.S. trade, which has taken a hit from bilateral tensions. Wang's statement on Saturday appears to be a swipe at the China hawks resisting tariff removal.

The extra tariffs have dealt a stinging blow to the Chinese economy, and Washington has used them to bring Beijing to the negotiating table. In light of this success, the U.S. also wants an enforcement mechanism to ensure that China honors agreed-to terms.

Both sides have already agreed to hold regular working- and ministerial-level meetings. The Office of the U.S. Trade Representative and other agencies will receive input from American businesses to determine whether Beijing is in compliance.

Chinese Vice Commerce Minister Wang Shouwen at a press conference in Beijing. (Photo by Taro Yokosawa)

If issues arise, they will be brought up during the bilateral meetings. And if they are not resolved in a timely manner, the U.S. would reimpose tariffs.

American negotiators are also pushing their Chinese counterparts to make a hard commitment not to retaliate if tariffs are renewed through these channels, according to sources familiar with the trade talks. Lighthizer insists that this is the only way to make China keep its promises, but Beijing sees the proposition as one-sided.

"The enforcement framework must be two-way, impartial and equitable," Wang said.

The two sides also remain divided on Chinese subsidies to state-owned enterprises. The U.S. charges that the national and local subsidies enable Chinese companies to undersell the competition. But China has been cautious about radical subsidy reforms, believing that such a move could undermine the foundation of state-led capitalism.

Legislation slated to pass next Friday "makes clear that foreign capital will be able to receive all the incentives available to domestic corporations," Wang said.

Xiao Yaqing, chairman of State-owned Assets Supervision and Administration Commission, also defended the program. "There will be no financial subsidies that we give to state-owned enterprises that we will not give to other enterprises," Xiao said.

The annual National People's Congress currently dominates the news in China. But Wang said negotiators from both countries are working "day and night" to finalize an agreement. Trump and Xi had been expected to sign a final deal at a summit later this month.

But National Economic Council Director Larry Kudlow hinted at possible delays. Trump's top economic adviser told Bloomberg Television on Friday that while "the news reports of late March are ... in a loose sense accurate," the timing "could go into early April."

"Our conditions have to be met," Kudlow told CNBC that day. If offers by China do not measure up, "the United States will stick to its guns, believe me on that," he said.

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