Critics fear China has trade edge over Trump after US puts trade war 'on hold'

SPH Brightcove Video
US Treasury Secretary Steve Mnuchin told Fox News on Sunday that the US and China have agreed to hold off on threats to slap steep tariffs on each other's goods while they work on a bilateral trade pact.

WASHINGTON (WASHINGTON POST) - US President Donald Trump's tough-guy persona is taking a beating from China, judging from the reaction of some of his allies on Capitol Hill and in the trenches of the trade wars.

The former business executive, who prides himself on his negotiating savvy, is facing criticism for bending to the Chinese government on two key trade disputes in the space of a week, alarming longtime supporters who had welcomed his call for a more confrontational approach to Beijing.

On Sunday (May 20), Treasury Secretary Steven Mnuchin said that the administration put its trade war with China "on hold" after two days of talks in Washington that he said had produced an agreement on increased Chinese purchases of American products and measures to make it easier for US companies to operate in China.

Even though the agreement lacked the specific US$200 billion (S$269 billion) reduction in the US trade deficit with China that was Trump's signature demand on trade, the president halted tariffs he had threatened to impose on US$150 billion in Chinese products.

In an earlier sign of softening, Trump directed administration officials to consider easing harsh penalties on a prominent Chinese telecom company that had violated US sanctions on Iran and North Korea.

"It's a huge disappointment given the expectations," said Scott Paul, president of the Alliance for American Manufacturing, a partnership between steelworkers and their employers.

"It plays right into Beijing's hands...and is more of the same old failed policies we saw under the Bush and Obama administrations."

US President Donald Trump proclaimed that the United States "has entered a new era in trade policy that is based on the recognition that our economic security is critical to our national security." PHOTO: AFP

Administration officials on Sunday scrambled to cast the Chinese talks as a victory, while some staunch Trump supporters questioned whether Trump had blinked in the first major confrontation with China.

"Not good enough. Time to take the gloves off," Dan DiMicco, former chief executive of steelmaker Nucor, tweeted on Saturday.

Meanwhile, Sen. Marco Rubio, R-Fla., warned in a tweet on Sunday that by continuing to talk while putting the tariffs on hold "#China has outnegotiated the US again".

Settling for Chinese promises of increased purchases of American goods and improvements in intellectual property laws marked a shift for the administration, which disparaged earlier US diplomatic dialogues with China as fruitless.

The president personally demonstrated an appetite for harsher measures, saying at one point that trade wars were "good and easy to win".

The administration's rocky handling of relations with China reflects a complex intermingling between economic and national security.

SPH Brightcove Video
President Donald Trump's top economic advisor, Larry Kudlow, tells CBS News' Face the Nation programme they've made 'a lot of progress' in US-China trade talks.

Trump on Friday proclaimed that the United States "has entered a new era in trade policy that is based on the recognition that our economic security is critical to our national security."

In March, he cited national security to justify imposing tariffs on imported steel and aluminum, a move designed to boost domestic employment. But now, national security concerns are causing him to give ground on other economic objectives.

Dennis Wilder, a former China analyst for the Central Intelligence Agency, said the president's softer line was linked to his desire for a successful June 12 summit with North Korean leader Kim Jong Un, a Chinese ally.

The recent visit to Beijing of a North Korean delegation of municipal and provincial officials - the first such visit in eight years - suggested that Beijing might have been preparing to relax its sanctions on Pyongyang, perhaps in retaliation for Trump's tariff threats, Wilder said.

"The administration has been a little rattled by how quickly the China-North Korea rapprochement occurred," he said.

"He probably believes that China is using the North Korea card in the trade negotiations."

Trump threatened in April to impose tariffs on up to US$150 billion in Chinese imports unless China made widespread changes in industrial policies that he said required US companies to surrender technology secrets to do business in China.

Mnuchin said the two sides have agreed on a "framework" to avoid the sanctions that requires China to lower tariffs on unspecified American goods, protect US technology and buy more made-in-the-USA items.

"Right now we have agreed to put the tariffs on hold while we try to execute the framework," Mnuchin said on "Fox News Sunday."

Commerce Secretary Wilbur Ross will be dispatched to Beijing "immediately" to work out the details of accelerated Chinese purchases, said Mnuchin, who led the US delegation in the talks with a Chinese team headed by Vice-Premier Liu He.

The treasury secretary would not comment on reports that China had balked at a US request for US$200 billion in increased annual purchases, a figure that many economists regard as impossible to execute.

Instead, he said the two sides had agreed on specific targets for individual sectors, such as agriculture and energy.

"We expect to see a very big increase, 35 to 45 percent increases in agriculture this year alone," Mnuchin said. "In energy, doubling the energy purchases. I think you could see US$50 (billion) to US$60 billion a year of energy purchases over the next three to five years."

Other administration officials have suggested that China might buy enormous quantities of liquefied natural gas, though there are questions about the volumes that the limited US export infrastructure could handle.

Mnuchin's remarks came one day after the United States and China released a joint statement that appeared to take a step back from a potential trade war. Larry Kudlow, director of the National Economic Council, said Friday that China had agreed to buy "at least US$200 billion" more from the United States each year.

On Sunday, Kudlow appeared to back away from that claim, saying on ABC News' "This Week" that "there's no agreement for a deal. We never anticipated one. There's a communique between the two great countries. That's all."

Mnuchin said the president "can always decide to put the tariffs back on if China doesn't go through with their commitments."

Amid concerns that Trump was also preparing to soften the punishment for a major Chinese telecom company that had illegally traded with Iran and North Korea, Mnuchin said the administration "didn't agree to any quid pro quo."

Chinese President Xi Jinping asked his American counterpart to "look into" a Commerce Department enforcement action against ZTE that threatened to put the company out of business.

After ZTE violated the terms of a 2017 settlement of criminal and civil charges, the department slapped a seven-year ban on US suppliers doing business with the company.

Last week, after Trump directed the Commerce Department in a tweet to help the company return to normal operations, lawmakers from both parties objected. The Republican-controlled House Appropriations Committee amended a must-pass annual spending bill to bar the department from lifting the penalties.

"I can assure you that the president wants us to be very tough on ZTE, and all he did was ask the secretary to look into this," Mnuchin said.

Kudlow on Friday said that ZTE would have to overhaul its top management ranks before the United States would ease the enforcement action.

Mnuchin also suggested that Trump was prepared to wait until 2019 to wrap up negotiations aimed at a new North American trade deal. He confirmed that the United States, Mexico and Canada remain "far apart" after nine months of talks, having missed a deadline set by House Speaker Paul Ryan, R-Wis., last week to reach a deal on which lawmakers could vote this year.

"The president is more determined to have a good deal than he is worried about any deadline," the treasury secretary said.

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