U.S., China Quietly Seek Trade Solutions

China and the U.S. have quietly started negotiating to improve U.S. trade in Chinese markets.

This has come after harsh words from both sides over Washington’s threat to use tariffs to address trade imbalances.

The talks cover wide areas including financial services and manufacturing.

Furthermore, the Trump administration has set out specific requests.  These include a reduction of Chinese tariffs on U.S. automobiles, more Chinese purchases of U.S. semiconductors and greater access to China’s financial sector by American companies.

The behind-the-scenes discussions might come as relief to those rattled by announcements last week.  The U.S. announced plans to hit China with tariffs, investment restrictions and other measures.  The U.S. initiatives are aimed at addressing the U.S.’s $375 billion merchandise trade deficit with China. The announcement—and the immediate threat of Chinese retaliation—sent U.S. stock prices into a sharp decline.

The U.S. is also pressing China to ease restrictions on U.S. financial businesses.  In particular, the U.S. complained about requirements that U.S. companies operate as joint ventures under which U.S. firms are in many cases limited to 51% ownership.

In response to the U.S. tariff threat, Chinese officials have been careful not to escalate the fight by much.  China’s Commerce Ministry accused the U.S. of “setting a vile precedent.”  In addition, China rolled out penalties against $3 billion in U.S. goods.  Specifically, these included fruit, pork, recycled aluminum and steel pipes. The ministry said those measures were aimed at new U.S. tariffs on Chinese steel and aluminum.

Mr. Trump has said he wants China to reduce the bilateral trade deficit by $100 billion.  As part of that, he is looking to boost sales of U.S. cars and semiconductors in China.  “The word that I want to use is reciprocal.  When they charge 25% for a car to go in, and we charge 2% for their car to come into the U.S., that’s not good.”  The U.S. actually assesses tariffs of 2.5% on imported cars; China’s is 25%. 

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