Trump team weighs tariff cut to clinch China trade deal

US Treasury Secretary Steven Mnuchin is preoccupied by the impact of a prolonged trade conflict with China on financial markets and the US economy, and is said to have proposed a tariff reduction.
US Treasury Secretary Steven Mnuchin is preoccupied by the impact of a prolonged trade conflict with China on financial markets and the US economy, and is said to have proposed a tariff reduction.PHOTO: BLOOMBERG

But Treasury chief's proposal unlikely to pass muster with trade hawks in administration

WASHINGTON • The Trump administration is considering eliminating tariffs on billions of dollars of Chinese imports to spur progress towards a trade deal, less than two weeks before a high-level delegation from Beijing is scheduled to arrive in Washington for talks.

Treasury Secretary Steven Mnuchin has proposed a tariff reduction as an incentive for China to sweeten its offer to the United States, according to two people familiar with the discussions.

However, administration hardliners, including US Trade Representative Robert Lighthizer, are opposed to eliminating the tariffs before China has taken irreversible steps to meet American demands.

President Donald Trump last year imposed tariffs on Chinese industrial and consumer goods as leverage in talks aimed at shrinking the US trade deficit and forcing China to abandon discriminatory trading practices.

If negotiations do not succeed by March 1, tariffs on US$200 billion (S$271 billion) worth of Chinese products are scheduled to rise to 25 per cent from 10 per cent. Officials are debating whether to instead eliminate the levies on some or all of the affected Chinese goods.

After years of tough talk regarding China, Mr Trump in recent months has warmed to the idea of striking a deal with Beijing.

The idea of an early tariff cut has not yet reached his desk, with the administration scrambling to manage a government shutdown that entered its 28th day yesterday.

 
 

But weakness on Wall Street - where the Dow Jones Industrial Average has lost more than 9 per cent since its Oct 3 peak - and mounting unease among Mr Trump's political supporters hurt by the tariff war are triggering the President's dealmaking instincts, the people familiar with the discussions said.

"He's driving towards a deal," said one business executive who asked not to be named. "He wants a deal and may be willing to settle for not very much to get it."

Mr Trump agreed with Chinese President Xi Jinping over dinner in Buenos Aires, Argentina, last Dec 1 to delay a scheduled tariff increase and launch renewed talks aimed at a comprehensive trade deal.

Washington has insisted for months that it would not remove tariffs unless China agreed to significantly higher purchases from US businesses and changes in its state-dominated economic system.

The administration has long been divided over the best approach to China, with Mr Mnuchin preoccupied by the impact on financial markets and the economy of a prolonged trade conflict and Mr Lighthizer and White House adviser Peter Navarro determined to force what they see as long-overdue changes in ties with Beijing.

"Neither Secretary Mnuchin nor Ambassador Lighthizer has made any recommendations to anyone with respect to tariffs or other parts of the negotiation with China," said a spokesman for the Treasury Department. "This an ongoing process with the Chinese that is nowhere near completion."

Mr Trump has oscillated between his team's hawks and doves and could do so again, according to a former Treasury Department official.

Chinese Vice-Premier Liu He is scheduled to lead the Chinese side in the next round of talks, starting on Jan 30. Mr Lighthizer will head the US delegation.

WASHINGTON POST

A version of this article appeared in the print edition of The Straits Times on January 19, 2019, with the headline 'Trump team weighs tariff cut to clinch China trade deal'. Print Edition | Subscribe