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Trade war

US and China agree to 'substantially' reduce trade deficit: statement

Beijing will increase purchases but avoids $200bn target figure

Washington and Beijing could not agree in their latest talks to numerical targets to reduce China's trade surplus.   © AP

WASHINGTON -- The U.S. and China issued a joint statement on Saturday regarding the two-day trade consultations that ended on Friday. The two sides agreed on "substantially" reducing the trade imbalance, but fell short of announcing a target figure.

"There was a consensus on taking effective measures to substantially reduce the United States trade deficit in goods with China," the statement said. "To meet the growing consumption needs of the Chinese people and the need for high-quality economic development, China will significantly increase purchases of United States goods and services," it added.

The statement made no mention of the $200 billion target the White House had touted earlier.

It pointed to agriculture and energy as two areas in which there would be "meaningful increases" in U.S. exports. The U.S. will send a team to China to work out the details, the statement said.

In reporting about the joint statement, China's Xinhua News Agency said the two sides vowed "not to launch a trade war against each other." That phrase was not included in the statement issued by the White House.

After the two-day talks, the parties did not hold a joint news conference, and took a full day before issuing the joint statement, showing the difficulty in reaching an agreement about the wording.

But the risk persists that the dispute could escalate again. The U.S. has not ruled out the option of imposing additional tariffs on Chinese products worth $50 billion.

The second round of talks focused on three areas: reducing the trade imbalance, easing sanctions on Chinese smartphone maker ZTE, and reviewing "Made in China 2025," Beijing's policy of giving the country an edge in strategic industries.

Trump has demanded that Beijing cut its $375 billion a year trade surplus with the U.S.

But Beijing refused to set a numerical target for how much it would reduce its trade surplus and has denied reports by Western media that China offered measures to reduce its trade deficit with the U.S. by $200 billion.

"Economic and trade cooperation between China and the U.S. should not be based on planned economy," said Gao Feng, spokesperson for China's Commerce Department, earlier.

Yet Beijing has shown a willingness to compromise in some areas. The Chinese side proposed that it increase imports of U.S. products, including natural gas, crude oil and other natural resources, farm products such as soy beans, as well as semiconductors and airplanes.

China also agreed to open its financial, medical and other service sectors as requested by the U.S. It said it will enhance its efforts to protect intellectual property.

U.S. and China will "continue to engage at high levels" and "seek to resolve their economic and trade concerns in a productive manner," the joint statement said.

Meanwhile, the statement made no mention of ZTE.

The U.S. Department of Commerce last month banned ZTE from buying U.S. technology for seven years on charges of illegally exporting sensitive knowhow to Iran and North Korea and misleading the U.S. government. But President Donald Trump has shown a positive stance toward easing sanctions on ZTE, saying Chinese President Xi Jinping had asked him to rescue the company.

Nevertheless, the majority of U.S. lawmakers remain cautious. Despite China's proposals to expand imports from the U.S. in exchange, Washington had little choice but to put off easing the sanctions.

ZTE is thought to have links with People's Liberation Army, and the U.S. Congress considers the smartphone maker to be a significant security threat. Even with his vaunted "deal"-making strategies, it would be difficult for Trump to sway the minds of many in Congress.

Behind the ZTE issue is the rivalry between the two superpowers over technology.

President Trump has demanded that Beijing review "Made in China 2025," an initiative led by President Xi to nourish high-tech industries through massive subsidies. The U.S. is concerned it could lead to an insistence on the transfer of sophisticated technologies, and a worldwide supply glut of related products.

The two counties do not appear to have narrowed the gap on this front, as the joint statement made no mention of Made in China 2025.

Commerce Secretary Wilbur Ross has insisted the U.S. is preparing to impose higher tariffs if talks between the two countries do not go well. In addition to Ross, the other U.S. participants at the meeting included Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer. The Chinese side was headed by Vice Premier Liu He, right-hand man to President Xi.

Reducing the trade deficit with China was a key pillar of Trump's election campaign in 2016. With mid-term elections scheduled for this autumn, the Trump administration may be preparing a range of sanctions to keep the pressure on China.

To complicate matters further, North Korean leader Kim Jong Un appears to be reconsidering his commitment to talks with the U.S. following his recent visit to China.

"It could be that President Xi is influencing Kim Jong Un," Trump said.

With the world economy already facing uncertainties, such as a possible currency fall in some emerging economies, prolonged tensions between the two superpowers could further undermine market sentiment.

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