Thread: Bye Bye Trade War? China Plans $1 Trillion Buying Spree to Reduce US Trade Deficit

Bye Bye Trade War? China Plans $1 Trillion Buying Spree to Reduce US Trade Deficit

China has extended the olive branch back to the United States by offering a path to eliminate Washington’s burgeoning trade deficit with the country, Bloomberg reported Friday. The news comes less than a day after The Wall Street Journal reported that the Trump administration was considering lifting tariffs amid the ongoing trade war.

China Proposes Six-Year Buying Spree

Citing sources familiar with the matter, Bloomberg reported Friday that China has offered to significantly boost its purchase of U.S. goods over a six-year period in an effort to re-balance trade between the two superpowers. By increasing its annual imports from the United States, Beijing would reduce its trade surplus to zero by 2024. That would require a spending boost of more than $1 trillion.

Last year, Beijing’s surplus with the U.S. stood at $323 billion.

Trade War Truce?

Trade talks between the U.S. and China are progressing at breakneck speed, a strong sign that both sides are looking to end the tariff dispute before March. That’s when the 90-day truce agreed to by President Donald Trump and China’s Xi Jinping is set to expire.

U.S. officials are reportedly considering lifting tariffs on Chinese imports to give Beijing a bigger incentive to negotiate a fairer trade deal. Last year, the Trump administration announced duties on $200 billion worth of Chinese goods and threatened additional tariffs if Beijing responded. Tensions have simmered down since December when the leaders of both countries met face-to-face on the sidelines of the G20 summit in Buenos Aires, Argentina.

Last week marked the first face-to-face meetings between Chinese and American trade delegates since the G20 summit. The meetings, which went a day longer than planned, resulted in China agreeing to purchase more U.S. farm and agricultural commodities. Chinese officials have also agreed to grant wider access to mainland markets to U.S. firms.

Several risks stand in the way of a comprehensive end to the trade war. Chief among them is the ongoing drama involving Huawei Technologies Corp. U.S. federal prosecutors are following up on civil lawsuits against the tech giant by launching a wider investigation into the company. According to The Wall Street Journal, the investigation has reached an advanced stage and could lead to an indictment shortly.

https://www.yahoo.com/finance/news/b...160627486.html

Even though I'm pissed at Trump for not keeping his word on illegal immigration, I have to give the man credit on this. No other past president had the balls to confront China on this. Kudos to Trump on this deal. Very well done.

Trump and his Trade Tream are geniuses and the most ferocious economic patriots our country has ever had the blessing to enjoy and benefit from. They are so competent, they leave me almost speechless, which is a hard task to achieve.

Thank you President Trump and Trade Team. Thank you very very much.

Dow was up another 500 points today, closed at 24,706.

Thanks for posting this great news, 6 Million Dollar Man.

US-China see trade progress, but Trump still shrewdly negotiating: Larry Kudlow

By Henry Fernandez
Published January 18, 2019 FOXBusiness

Trump wants to make a China deal that’s great for America: Larry Kudlow

White House Economic Council Director Larry Kudlow discusses the U.S.-China trade dispute and why the Chinese should remove their tariffs.

White House Economic Council Director Larry Kudlow told FOX Business that the U.S. continues to make progress towards resolving the trade dispute with China.

“We’ve made some progress with China in the deputy’s meeting in Beijing,” Kudlow said during an interview on “Bulls & Bears Opens a New Window. ” Friday. “Nothing has been resolved, nothing on paper, no contracts" he said, noting that recent news reports of a deal being imminent are not accurate at this time.

However, President Trump does remain optimistic on the prospect of reaching a trade deal and is shrewdly negotiating with Beijing to strike the best deal for the U.S. “He wants to make a China deal that is a great deal for America and its workforce and its farmers and its manufacturers and its technology,” Kudlow said.

A U.S. team led by Deputy U.S. Trade Representative Jeffrey Gerrish, and representatives from the U.S. Departments of Agriculture, Commerce, Energy and Treasury, along with White House senior officials, met with China’s Foreign Ministry a little over a week ago as the two sides look to end the trade spat that is striking fear of a global economic slowdown.

The world’s two largest economies have been locked in a trade war since last year that has resulted in a tit-for-tat tariffs against each other's goods. U.S. financial markets are also following and reacting to reports on progress and setbacks.

Kudlow said a U.S. - China trade deal is vital to the growth of the U.S. economy. “The China trade talks will have an impact on future growth in the United States and prosperity and jobs and profits,” he said.

https://www.foxbusiness.com/politics...g-larry-kudlow

China Offers a Path to Eliminate U.S. Trade Imbalance, Sources Say

Bloomberg News
January 18, 2019, 10:19 AM EST
Updated on January 18, 2019, 1:47 PM EST

Buying spree offer was made at Beijing talks in early January
U.S. officials said to be skeptical, want gap closed sooner

China has offered to go on a six-year buying spree to ramp up imports from the U.S., in a move that would reconfigure the relationship between the world’s two largest economies, according to officials familiar with the negotiations.

By increasing goods imports from the U.S. by a combined value of more than $1 trillion over that period, China would seek to reduce its trade surplus -- which last year stood at $323 billion -- to zero by 2024, one of the people said. The officials asked not to be named as the discussions aren’t public.

The offer, made during talks in Beijing earlier this month, was met with skepticism by U.S. negotiators who nonetheless asked the Chinese to do even better, demanding that the imbalance be cleared in the next two years, the people said. Economists who’ve studied the trade relationship argue it would be hard to eliminate the gap, which they say is sustained in large part by U.S. demand for Chinese products.

U.S. stocks extended gains and the dollar rose following the news. The S&P 500 Index rallied, climbing 1.3 percent by 1:27 p.m. and heading for its fourth weekly advance, while the dollar traded at session highs.

Minding the Trade Gap

It’s not the first time China has made an offer to reduce the deficit as a way of trying to break the deadlock between the sides which has darkened the global economic outlook and roiled financial markets since last year. In May, Trump scrapped a framework for a deal negotiated by Treasury Secretary Steven Mnuchin that would have seen China “significantly” increase purchases of U.S. goods.

By agreeing to buy more goods from the U.S., China may just shift its trade surplus toward other trading partners, said Tom Orlik, the chief economist for Bloomberg Economics.

“If China switches its imports from other countries to the U.S. -- less Brazilian soybeans, more U.S. soybeans -- that might help deal with their bilateral problem with the U.S., but at the expense of worsening imbalances with other countries,” he said.

Additionally, the types of products that China offers to buy more of could matter more than the overall target for a dollar amount, Orlik said. Airplanes, soybeans and automobiles were among China’s top U.S. imports last year.

“Over the years, China has used the offer of purchasing more technologies with national security applications as a gambit in trade negotiations,” said Orlik. “That’s always been unacceptable to the U.S. because of the strategic costs.”

Failed Attempt

Even a massive buying binge would likely fail to eliminate the trade deficit with China, said Brad Setser, who served as deputy assistant secretary for international economic analysis in the Treasury during the Obama administration.

It’s not clear how quickly U.S. farmers and companies would be able to meet increased Chinese demand, he said. Increasing exports of soybeans would require more land dedicated to growing the crop and investment in storage capacity. Likewise, exporting more LNG to China would demand a surge in investment in export terminals. For Boeing, which has been straining to meet existing orders for its planes, it would likely mean adding a new plant.

Moreover, none of that would address U.S. demand for Chinese-produced goods and China’s control of the assembly of products such as smartphones and laptops, or some of the main drivers of the U.S. trade deficit. Shifting production or final assembly to a place such as Vietnam would do a lot to reduce the U.S. deficit with China but it would potentially be illusory.

Closing the trade gap “would require enormous changes and it would require and all out effort to get a Chinese industrial policy to disguise China’s exports to the U.S. by routing them elsewhere,” said Setser, who is now at the Council on Foreign Relations. “You can’t get rid of the bilateral deficit unless you shift the location of final electronics assembly out of China. The math doesn’t work.”

Decisions Pending

No decisions were finalized in the latest Beijing talks and discussions are set to continue at the end of January, when Chinese Vice Premier Liu He is scheduled to travel to Washington.

The U.S. will miss an opportunity for discussions with its trading partners after President Donald Trump canceled his trip and the U.S. delegation’s visit to the World Economic Forum in Davos next week amid the partial government shutdown. While no plans were disclosed for negotiations, Chinese Vice President Wang Qishan is due to attend the Davos summit.

There’s no clear sign that such an offer would now have a greater chance of success or even if it’s practically feasible. U.S. negotiators are also focused on matters including China’s alleged intellectual-property malpractices and state support of industry, disputes that are much harder to bridge. The Americans’ major sticking points were more prominent issues than China’s import plans during the latest round of talks in Beijing, one of the people said.

The offer implies raising the annual import total from $155 billion to around $200 billion in 2019 and in increasing steps thereafter, reaching an annual total of about $600 billion by 2024, one of the people said.

The Commerce Ministry in Beijing didn’t immediately respond to request for comment on the negotiation details. The office of the U.S. Trade Representative didn’t immediately respond to a request for comment.

https://www.bloomberg.com/news/artic...rade-imbalance

Looks like there's still work to do, but wow, is this looking great. Apparently Trump wants that trade deficit balanced before 2024 plus an end to the intellectual property theft, dumping, and a same rules game with the WTO.

Exclusive: U.S. demands regular review of China trade reform

Michael Martina, Chris Prentice
Business News
January 18, 2019 / 1:30 PM / Updated 6 hours ago
5 Min Read

BEIJING/WASHINGTON (Reuters) - The United States is pushing for regular reviews of China’s progress on pledged trade reforms as a condition for a trade deal - and could again resort to tariffs if it deems Beijing has violated the agreement, according to sources briefed on negotiations to end the trade war between the two nations.

A continuing threat of tariffs hanging over commerce between the world’s two largest economies would mean a deal would not end the risk of investing in businesses or assets that have been impacted by the trade war.

“The threat of tariffs is not going away, even if there is a deal,” said one of three sources briefed on the talks who spoke with Reuters on condition of anonymity.

Chinese negotiators were not keen on the idea of regular compliance checks, the source said, but the U.S. proposal “didn’t derail negotiations.”

A Chinese source said the United States wants “periodic assessments” but it’s not yet clear how often.

“It looks like humiliation,” the source said. “But perhaps the two sides could find a way to save face for the Chinese government.”

The administration of U.S. President Donald Trump has imposed import tariffs on Chinese goods to put pressure on Beijing to meet a long list of demands that would rewrite the terms of trade between the two countries.

The demands include changes to China’s policies on intellectual property protection, technology transfers, industrial subsidies and other trade barriers.

An enforcement and verification process is unusual for trade deals and is akin to the process around punitive economic sanctions such as those imposed on North Korea and Iran.

Disputes over trade are more typically dealt with through courts, the World Trade Organization (WTO) or through arbitration panels and other dispute settlement mechanisms built into trade agreements.

Trump’s team has criticized the WTO for failing to hold China accountable for not executing on promised market reforms. The U.S. has also criticized the WTO’s dispute settlement process and is seeking reforms at the organization.

Regular reviews would be one potential solution to address a demand from U.S. Trade Representative Robert Lighthizer for ongoing verification of any trade pact between the two countries, three sources familiar with the talks told Reuters. The threat of tariffs would be used to keep reform on track, the sources said.

Lighthizer is leading negotiations with China. A USTR spokesman declined to comment on the possibility of regular assessments.

The idea of quarterly reviews of quarterly reviews was part of a U.S. negotiating document leaked after talks in May 2018, before the United States had slapped its first round of duties on $50 billion worth of Chinese goods.

The renewed focus on regular reviews in current negotiations - this time carrying the threat of tariffs - underscores the growing distrust between the two countries.

The extra scrutiny is needed and should be based on clear benchmarks - with consequence for failing to meet them, said Erin Ennis, Senior Vice President of the U.S.-China Business Council, a trade group representing American companies doing business in China.

“It needs to be tied to removing or reducing the tariffs,” Ennis said. “If China can show compliance through a process like this, it would also be a trust-building measure for both sides.”
Wall Street rallies

BROKEN PROMISES

Trump’s administration has accused China of repeatedly failing to follow through on previous pledges to implement reforms sought by the United States.

Washington often cites as an example the difficulties still faced by foreign payment card operators in entering China’s market despite a 2012 WTO ruling that Beijing was discriminating against them.

A separate industry source said it is likely that different agreement on separate issues - forced technology transfer, intellectual property, changes to China’s legal system - would require separate verification processes, all of which will need to be hammered out by negotiators.

“The challenge of verification and enforcement stems from the fact that China has made promises it hasn’t kept,” the source said.

Trump and Chinese President Xi Jinping agreed to a 90-day truce in the trade war in December to give their teams time to negotiate a deal. Nearly 50 days later, there is little sign that China will make the concessions the U.S. is seeking.

Lighthizer saw no progress on structural issues at three days of mid-level talks in Beijing last week, Republican Senator Chuck Grassley said on Tuesday.

China’s Vice Premier and lead negotiator Liu He is due to visit Washington for the next round of talks with Lighthizer and U.S. Treasury Secretary Steven Mnuchin at the end of the month.

Reporting by Michael Martina in Beijing and Chris Prentice in Washington; Additional reporting by David Lawder in Washington; Editing by Simon Webb and Brian Thevenot
Our Standards:The Thomson Reuters Trust Principles.

https://www.reuters.com/article/us-u...-idUSKCN1PC2AG

So impressive. Remarkable strength, tenacity, and ferocity in these negotiations, yet pleasant, amiable, polite, and detailed. That's Trump and he has picked an extraordinary team to work on this problem that is just like him yet with some diversity of opinions that float the boat when it looks like it's stalling and then revs the engine and roars towards the finish line. Peter Navarro and Robert Lighthizer, Wilbur Ross, Larry Kudlow who was a skeptic and now a believer, Jared and others who have learned the deal we seek and are demonstrating the will and ability to deliver it, and of course, our dear President Trump who has already secured President Xi's agreement to his 142 demands.

It's an extraordinary event in our country's history. I hope more people take an interest and follow it, otherwise, you'll miss it, and that would be a shame. USMCA done waiting for Congress to ratify. South Korea Trade Agreement is done. Not sure if Congress has to ratify or not, waiting to hear about that. Japan Trade Agreement in final stages, India is in final stages. China ... wow, 6 more weeks and then done. EU .... in the works. Waiting for UK to Brexit .... ???!! When, England, will you control your own destiny so we can do a deal? I hope soon.

This is such exciting stuff I can barely stand it. I just want to hoop and holler for joy and hug this President who is responsible for it all. What a blessing to our country he is.

Originally Posted by Judy

This is such exciting stuff I can barely stand it. I just want to hoop and holler for joy and hug this President who is responsible for it all. What a blessing to our country he is.

This was a good deal, I agree, but I'll hoot and holler for Trump once he gets rid of the 30 million illegals in this country as well. But I can't lie, even though Trump pisses me off on dragging his feet on illegal immigration, this deal with China is going to create a lot of jobs here. This is great news indeed.

And maybe this will be a lesson to future presidents, now that they will see how it's done, and to stop allowing other countries to take advantage of us.

Yes, Trump is educating an entire country on the value and importance of protected trade policies. When you are the big dog country you have to protect it, otherwise, you'll be devoured by the parasites.