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Trade war

US economic adviser hints at partial lifting of China tariffs

Lighthizer and Mnuchin back in Beijing, targeting April deal

U.S. Trade Representative Robert Lighthizer, right, and Treasury Secretary Steven Mnuchin, center, arrive at their Beijing hotel on March 28.   © AP

WASHINGTON/BEIJING -- White House economic adviser Larry Kudlow on Thursday signaled the possibility of lifting some tariffs on China as part of a trade deal with Beijing.

"We have to see what the track record is, and we're not going to give up our leverage," Kudlow told reporters on the sidelines of the U.S. Export-Import Bank annual conference in Washington. "However, just to clarify, that doesn't ... necessarily mean all the tariffs will be kept in place. Some of the tariffs will be kept there."

President Donald Trump has said that the U.S. intends to keep tariffs in place even after a deal is reached with China but has not clarified whether all tariffs will stay. China wants to see the immediate lifting of all levies, creating a major sticking point in bilateral trade talks.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin arrived in Beijing on Thursday afternoon to push for a deal. They plan to dine with Chinese Vice Premier Liu He in the evening before a full day of talks Friday. Negotiations will continue in Washington on Wednesday.

China enacted a foreign investment law banning forced technology transfers -- a major U.S. concern -- at this year's National People's Congress, which ended March 15. Commerce Ministry spokesperson Gao Feng said Chinese law now guarantees that technology cannot be forcibly transferred by administrative means.

"If you looked at the texts a month ago compared to today, we have moved forward in all areas," a senior U.S. official told Reuters on Wednesday. Chinese negotiators are "talking about forced technology transfer in a way that they've never wanted to talk about before -- both in terms of scope and specifics."

But the gulf between the two economic powers remains wide. China insists that all tariffs be removed once a trade deal is reached, while the U.S. argues for a gradual reduction.

"We aren't yet where we want to be," the official added.

Another sticking point involves an enforcement mechanism to go along with a deal. The U.S. wants to reimpose tariffs unilaterally should a violation occur, while China demands a "two-way" verification system that is "fair and equal," in the words of Vice Commerce Minister Wang Shouwen.

Trump and President Xi Jinping could meet in late April, but that summit might be postponed until May or later should talks in Washington next week break down.

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