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Trade war

Trump wants 'signing summit' with Xi as trade deal nears

Both sides look to limit economic damage, but subsidy issue remains unresolved

Flags of U.S. and China are placed for a meeting in a conference room in Beijing.   © Reuters

WASHINGTON -- U.S. President Donald Trump said on Monday that he will have a "signing summit" with Chinese President Xi Jinping for a trade deal, one day after postponing a March 1 deadline for a tariff increase. 

"I told you how well we did with our trade talks in China," Trump told a gathering of U.S. governors at the White House on Monday morning. "We're going to have another summit. We're going to have a signing summit, which is even better. So hopefully, we can get that completed."

"We're getting very, very close" to the final deal, he added.

Trump's enthusiasm for agreeing to a deal with China is likely a reflection of his will to prevent further economic damage, and spares China from a diplomatic defeat on the eve of a high-profile political event.

The decision to delay the tariffs followed six days of trade talks here, which brought "substantial progress" on "intellectual property protection, technology transfer, agriculture, services, currency, and many other issues," Trump tweeted.

U.S. President Donald Trump walks to board Air Force One for travel to a second summit meeting with North Korea's Kim Jong Un in Hanoi, Vietnam from Joint Base Andrews in Maryland, U.S.   © Reuters

While the president did not specify how far the March 1 deadline would be pushed back, he said he aims to wrap up negotiations at a meeting with Xi, which would likely take place next month.

Yet conspicuously missing from his tweets was any mention of Chinese subsidies to technology companies under the "Made in China 2025" industrial modernization initiative, one of the American side's main complaints. That Trump is nonetheless backing off suggests he is thinking of his prospects in the 2020 presidential election, which could hinge on the state of an economy that would suffer under a prolonged trade war.

The decision likely came as a relief to Beijing. For the U.S. to raise its additional 10% tariffs on $200 billion in Chinese goods to 25% on March 2 as scheduled -- just before China enters the global spotlight with the annual National People's Congress meeting starting March 5 -- could have embarrassed Xi and his government.

News of the delay bolstered the shares of Chinese lenders and insurers Monday, with Bank of China, Industrial and Commercial Bank of China, and China Construction Bank all rising at least 2.9%. Telecommunications company ZTE, which faces restrictions in the U.S. and elsewhere alongside Huawei Technologies, gained 1.7%

The talks have yielded an offer by Beijing to boost imports of American goods such as soybeans and liquefied natural gas by $1 trillion over six years, as well as a pledge to stabilize the yuan. Progress was also made on dealing with Chinese regulations that require foreign companies operating in China to hand over technology, a senior Trump administration official said.

Beijing had hoped to appease Washington with these proposals while saving the debate over structural reform for later. But no formal deal has been signed, and the U.S. is still pressing China on issues where it has little room to compromise.

"We have a few very, very big hurdles that we still have to face," U.S. Trade Representative Robert Lighthizer said Friday.

The subsidies are among the biggest of these obstacles. When Washington announced plans for new tariffs on Chinese goods last March, a senior official cited state aid that tilts the playing field against American companies as one of the trade action's main targets.

But Beijing has refused to consider scrapping the subsidies, which help to underpin its model of state capitalism and the rule of the Communist Party. The party-run People's Daily newspaper ran an editorial last week praising the role of state-owned enterprises in the economy.

Enforcement is another sticking point. The U.S. side, skeptical that China will keep its promises, has pushed hard for a provision that would let it raise tariffs again if the agreement is violated. Beijing, wary of prolonged American pressure, has opposed such a framework.

The tariff increase had originally been slated for January, but it was postponed after what Trump called an "amazing and productive" meeting with Xi in December. The two leaders agreed to a 90-day tariff cease-fire to allow for further trade negotiations, after which the higher duties would take effect if no deal was reached.

Trump is relenting now in part because uncertainty over the trade situation disrupted the once-steady upward march of U.S. stock prices and rattled many sectors of the economy. He touted the performance of American markets in a tweet Monday, noting that "the Dow Jones is up 43% and the NASDAQ Composite almost 50%" since his election in November 2016.

The president may also be wary of pressing China too hard just before his second summit with North Korean leader Kim Jong Un, given Pyongyang's warm relationship with Beijing.

Trump's focus on short-term results such as increased imports has dismayed China hawks in his administration.

These tensions surfaced briefly Friday at the president's news conference in the Oval Office with Chinese Vice Premier Liu He and top U.S. officials. When Trump insisted that the memorandums of understanding being negotiated at the talks "don't mean anything," a visibly frustrated Lighthizer cut in to assert that they are in fact binding contracts -- likely an unwelcome surprise for Trump, who demands absolute loyalty from his subordinates.

If the talks fall through, uncertainty will return to global markets. But if the two sides reach a deal that is light on real reform, Trump may face criticism from Japan and Europe that he let Beijing off easy.

Nikkei staff writer Issaku Harada in Beijing contributed to this report.

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