Talks between China and the U.S. will resume in Washington next week after both sides declared Friday that progress had been made in two days of high-level discussions in Beijing by negotiators seeking a breakthrough to end a bruising trade war.
With the conflict threatening to undermine global growth and even to decouple the world’s two biggest economies, Chinese President Xi Jinping met with U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven T. Mnuchin at a government guesthouse on Friday.
Afterward, Mnuchin tweeted that the talks were “productive,” and Lighthizer said, “We feel we have made headway on very, very important and difficult issues.” Xi agreed that “important progress” was made.
And later in Washington, President Trump said there was a “possibility” he would extend a March 1 deadline for the trade talks if the two sides are close to a deal. He said it would happen "if I see that we're close to a deal or the deal is going in the right direction."
Without a deal, the Trump administration says that tariffs already being imposed on $200 billion in Chinese goods would increase from 10% to 25%.
No details emerged of the progress to overcome the remaining thorny issues, with a meeting between Trump and Xi in future weeks seen as the best hope for an agreement, depending on the outcome of the Washington meeting next week.
Xi said the U.S and China were “inseparable” and warned that a continuing trade war would only hurt both nations.
“Maintaining the healthy and stable development of China-U.S. relations is in the fundamental interests of the two peoples and is widely expected by the international community,” Xi said, according to the New China news agency.
The Trump administration slapped tariffs on Chinese goods just over seven months ago, accusing China of stealing intellectual property, forcing American firms in China to surrender their technology to local partners and providing industrial subsidies to Chinese firms that make it impossible for foreign firms to compete. China responded with its own tariffs, which have hit U.S. soybean growers and other farmers hard.
Trump and Xi met in Argentina in December and agreed to delay tariff hikes for 90 days to allow for the current talks. The time frame appears relatively short, given the complexity and long-standing nature of the dispute.
Xi said that Trump and he had reached an important consensus in Argentina to work together to “jointly promote Sino-U.S. relations based on coordination, cooperation and stability.”
Since then, however, tensions have deepened as the U.S. ramped up pressure on Chinese technology firm Huawei, the world’s largest telecommunications equipment manufacturer, which it sees as a threat to national security. Xi said Friday that the trade talks since Dec. 1 had been “intensive and beneficial” and called for continued work next week to reach a deal.
“I hope that the two sides will strengthen communication, focus on cooperation, manage and control disparities on both sides and promote Sino-U.S. economic and trade cooperation and the health and stable development of bilateral relations in accordance with the principles and directions set by me and President Trump,” he said.
Hu Xijin, the editor of the state-owned Global Times newspaper, cited sources saying the sides were discussing how to draft an agreement, adding there was a “great possibility” of a deal. While positive, the comment suggested the two sides still do not have the draft framework of a deal with less than two weeks before the deadline.
One reason the talks have been so difficult is the breadth of U.S. demands: It not only wants China to buy more American goods, but is also calling for sweeping changes to China’s industrial policies.
China, which is aiming to transform from a low-wage economy based on the manufacture of cheap goods to a higher-wage, high-tech economy, sees support for top Chinese industries as a means to that end.
One of the main challenges for negotiating teams in coming days is how to meet American demands for enforcement mechanisms.
Trump said Tuesday he might be willing to allow a short-term extension on the deadline for a deal. White House economic advisor Larry Kudlow said Thursday that no decision had been made on an extension but added that the vibe in Beijing was good.
Washington had expected China to open up its economy to foreign competition after it joined the World Trade Organization in 2001, but the intervening period showed limited progress. With its economy slowing and factories closing or shedding low-skilled jobs, China may now be keen for a deal.
But American skepticism over whether China will deliver on any agreement has been a background concern as the talks have proceeded, with Washington attempting to extract a better deal for foreign companies in China and better protections for those firms’ technologies. Since joining the WTO, China has piggy-backed on foreign technology — and, according to Washington, stolen it outright in some cases — to emerge as a rising power that is increasingly producing its own cutting-edge technology. China has repeatedly denied the accusations of intellectual property theft.
Tensions have been magnified by a series of arrests of alleged Chinese spies and by Chinese anger over U.S. warships sailing through the South China Sea. China has expanded its claim to the region by building military installations on disputed islands in the sea.
Another source of tension has been U.S. efforts to dissuade allies from allowing Huawei to participate in building 5G communications networks. Washington has warned it may downgrade partnerships with European allies that use Huawei technology in their 5G networks. In addition, Huawei executive Meng Wanzhou was arrested in Canada in December on a U.S. request and faces an extradition hearing in coming months, a case that has infuriated China. And this week, the White House was preparing an executive order that could bar Chinese companies from selling equipment for use in future American telecommunications networks.
Beijing argues that U.S. actions on Huawei amount to harassment of an innocent company and abuse of Meng’s rights.
As the trade war has dragged on, China’s economy has slowed and some companies have shifted production to other Asian countries. Much of the economic slowdown in China, however, has come from actions taken by the government to reduce debt prior to the trade war.
In a sign of the depth of official concern, Chinese banks sharply increased lending in January, offering $477 million in loans designed to spur economic growth. The government has been pressing banks to lend more money to small, private companies, many of which are more severely stressed by the economic slowdown than state-owned companies.
During the talks, China has offered to buy more U.S. products such as soybeans and natural gas to narrow the trade gap, fast-tracked a law that it says will offer great protection for intellectual property and promised to create greater access for foreign firms.