The United States on Thursday welcomed China’s renewed purchases of U.S. farm goods while maintaining the threat of U.S. tariff hikes as the world’s two largest economies prepared the ground for talks aimed at breaking the logjam in their trade war.
Lower-level U.S. and Chinese officials are expected to meet within days in Washington ahead of talks between top trade negotiators in early October, seeking to ease a dispute that for more than a year has rattled financial markets and fuelled fears of a global recession.
Top-level negotiators last met face-to-face in China in July.
Washington is pressing China for an end to policies and practices including industrial subsidies and forced technology transfer. Meeting those demands would require structural change that it is unclear China would be willing to undertake.
The trade war is impacting the global economy. The International Monetary Fund on Thursday forecast that U.S. and Chinese tit-for-tat tariffs could reduce global GDP in 2020 by 0.8 per cent and trigger more losses afterward.
Global stocks rose on Thursday after both sides made concessions ahead of the talks. On Thursday, China importers bought at least 10 cargoes, or 600,000 tonnes, of U.S. soybeans for October-December shipment, the country’s most significant purchases since at least June, U.S. traders with direct knowledge of the deals said.
That came after U.S. President Donald Trump on Wednesday delayed an increase in tariffs on Chinese goods by two weeks and China exempted some U.S. drugs and other goods from tariffs.
While welcoming China’s overtures, U.S. Treasury Secretary Steven Mnuchin sought to temper optimism in markets that the gestures might lead to a trade deal. He told CNBC that Trump was prepared to keep or even raise tariffs on Chinese imports and that Beijing had asked for more concessions beyond the removal of tariffs.
The Wall Street Journal reported that China was seeking to narrow the scope of negotiations to trade matters by excluding national security issues.
The soybean purchases sent benchmark prices of the commodity, of which China is the top buyer, soaring. They were the largest by private Chinese importers since Beijing raised import tariffs on the U.S. oilseed by 25 per cent in July 2018 in retaliation for U.S. duties on Chinese goods. Duties were raised an additional 5 per cent this month.
U.S. farmers, a core component of Mr. Trump’s political base, have been among the hardest hit by the tariff battle that began more than a year ago and has escalated in recent weeks.
We “expect and we want them to buy agriculture. We view that as a personal attack on our farmers. They need our agriculture, and they’ve always bought our agriculture. So, this isn’t about just selling them soybeans, but we want to sell them soybeans,” Mr. Mnuchin said.
Earlier in the day in Beijing, Commerce Ministry spokesman Gao Feng said Chinese firms have started to inquire about prices for U.S. farm goods. He also said that China welcomed the U.S. delay to its scheduled tariff hike on billions of dollars worth of Chinese goods.
“[China] hopes both sides would continue to meet each other half way and adopt concrete actions to create favourable conditions for negotiations,” Mr. Gao told a briefing, noting that possible purchases included pork and soybeans, both of which are still subject to hefty Chinese duties.
China has bought U.S. pork despite tariffs of 62 per cent in place since last year because huge numbers of pigs have been culled across the country as Beijing struggles to contain an outbreak of African swine fever. The world’s biggest pork consumer has hiked imports to make up the shortfall.
China said it would reduce purchases of U.S. farm products in August after Mr. Trump vowed to impose new tariffs on around US$300-billion of Chinese goods, dimming prospects of a deal.
On Wednesday, the United States agreed to delay increasing tariffs on US$250-billion worth of Chinese imports from Oct. 1 to Oct. 15. The tariffs on those goods were set to increase to 30 per cent from 25 per cent.
Earlier on Wednesday, China announced it was exempting 16 types of U.S. products from tariffs, including some anti-cancer drugs and lubricants, as well as animal feed ingredients whey and fish meal.
William Reinsch, a former senior U.S. Commerce Department official, said the goodwill gestures being made on both sides should help Beijing and Washington back to the negotiating table, but big hurdles remained.
“Both sides are trying to find a way out of the box,” he said. “Short term, that’s good. But I don’t think anything’s changed on the fundamentals, and once they get back to the table, they’ll discover that.”