China wants cancelling of tariffs to be part of trade deal with US

Beijing

CHINA and the United States are holding "in-depth" discussions on a first-phase trade agreement, and cancelling tariffs is an important condition to reaching a deal, China's Commerce ministry said on Thursday.

The degree of tariff cancellation should fully reflect the importance of a "Phase One" agreement, ministry spokesman Gao Feng said at a briefing.

"China has emphasised many times that the trade war began with additional tariffs and should end with the cancellation of additional tariffs," he said.

On Tuesday, US President Donald Trump said a trade deal with China was "close" but offered no details and warned that he would raise tariffs "substantially" on Chinese goods without such a deal.

His threat was a reference to previously announced tariffs of 15 per cent on about US$156 billion of Chinese consumer goods set to take effect on Dec 15, said trade experts and a source close to the White House.

Those tariffs would hit video game consoles, computer monitors, Christmas decorations and items given as gifts during the approaching festive season.

Last week, White House advisers said the Dec 15 tariffs would probably be averted if a "Phase One" trade deal was reached.

"If both sides reach a 'Phase One' deal, the degree of tariff cancellation should fully reflect the importance of the deal; and its importance should be appraised by both sides together. Both sides are conducting in-depth discussions on this now," said Mr Gao.

Highlighting the volatile state of play in the 16-month long trade war, officials of both sides had said last week they had a deal to roll back tariffs, only to have Mr Trump deny any deal had been agreed.

The US leader has imposed tariffs on billions of dollars of Chinese goods to force major changes in China's trade and industrial policies.

The US administration is demanding that China end the theft and forced transfer of American intellectual property and curb subsidies to state-owned enterprises, while granting US companies more access to China's markets.

Mr Trump also wants China to substantially increase its purchases of US farm products.

China and the United States were near a deal in May when Beijing pulled away, prompting Mr Trump to raise tariff rates and embark on new rounds of punitive duties.

If an interim deal is finished and signed, it is widely expected to include a US pledge to scrap tariffs scheduled for Dec. 15.

A source previously told Reuters that Chinese negotiators wanted the United States to drop 15 per cent tariffs on about US$125 billion in Chinese goods that took effect on Sept 1. They also sought relief from earlier 25 per cent tariffs on about US$250 billion of imports, ranging from machinery and semiconductors to furniture.

Mr Gao said last week that both countries must simultaneously cancel some tariffs on each other's goods to strike a first phase pact.

Cancelling tariffs is in the interests of producers, consumers, China, the US and the world," he said on Thursday.

A Reuters poll of economists showed the trade war is unlikely to come to a permanent truce over the coming year.

China's economic growth has further slowed since the trade war erupted last year, expanding at its weakest pace in almost three decades.

Chinese factory output slowed substantially and more than expected last month, weighed by the ongoing trade war and broad weakness in global and domestic demand.

The disappointing numbers show China is off to a rough start in the final three months of this year, and will bolster calls for Beijing to roll out fresh support.

The US economy is forecast to have expanded at an annualised pace of 1.9 per cent in the July-to-Sept period, slightly down from 2.0 per cent in the second quarter.

Growth is expected to hover around that rate in each quarter through to the second half of 2021, say economists. REUTERS