Finance

China is reportedly open to a partial trade deal with the US — but only if Trump scales back planned tariffs

trump xi shake handsReuters/Jonathan Ernst

  • China appeared to ease its tone toward the US ahead of high-stakes trade talks set to take place at the end of the week.
  • Bloomberg reported early Wednesday that China would still be open to a limited trade deal if President Donald Trump were to back down from the scheduled tariff escalations he announced in recent months.
  • Trump would be unlikely to accept a long-term deal without Chinese concessions on structural issues, a White House official told Business Insider.
  • Visit Business Insider’s homepage for more stories.

China appeared to ease its tone toward the US ahead of high-stakes trade talks set to take place at the end of the week, even though officials and analysts said the prospect of a breakthrough between the two sides has dimmed in recent days.

Bloomberg reported early Wednesday that China would still be open to a limited trade deal if President Donald Trump were to back down from the scheduled tariff escalations he announced in recent months, citing an official with direct knowledge of the talks. That would include non-core commitments such as resumed agricultural purchases, which China halted last year to retaliate against the Trump administration.

The Chinese embassy did not immediately respond to an email requesting comment.

Trump would be unlikely to accept a long-term deal of that sort without Chinese concessions on structural issues, a White House official who requested anonymity to discuss ongoing negotiations told Business Insider. Those include intellectual property theft and large-scale state subsidies that officials found put the US at a disadvantage.

With a rapidly-evolving impeachment inquiry that was opened last month, the president could face increasing pressure to at least temporarily hold off on tariff escalations this month. On October 15, the Trump administration is set to raise the tariff rate on Chinese products to as high as 30%.

“The impeachment threat increases Trump’s incentives to agree a deal with mainland China, but the process can also heighten China’s incentives in extending the process longer as Trump’s approval rating slips,” analysts at JP Morgan wrote in a recent research note.

Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are set to meet with a Chinese delegation led by Vice Premier Liu He in Washington on Thursday and Friday. A series of likely hurdles have piled up ahead of those meetings, however, which are the first on US soil since thirteen rounds of negotiations collapsed in May.

On Monday evening, the US added 28 technology companies in China to an export blacklist late Monday over alleged human rights abuses in the Xinjiang region. The two sides have separately taken steps to tighten visa restrictions on each other this week.

White House officials have also continued to discuss a potential new policy that would limit investment flows into China, according to a source familiar with the matter. Bloomberg first reported the plan, which was disputed by the Trump administration but has been confirmed by several news outlets including Business Insider.

“The Trump administration appears to not be looking for leverage to make China ‘cry uncle,’ but instead, methodically reduce interdependence between the two countries in trade, finance, technology, and education,” said Scott Kennedy, a senior adviser at the Center for Strategic and International Studies who studies China. “And with its own nationalistic behavior, China is acceding to if not accelerating this divorce.”

Now read: Ray Dalio warns the White House’s latest plan to clamp down on Chinese investment could soon become a reality. Here’s why he thinks ‘all market participants need to worry.’

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