Tariffs on China imports biggest hurdle to trade deal

Tariffs are emerging as the main stumbling block in efforts by the US and China to come to a limited trade deal.

Tariffs are emerging as the main stumbling block in efforts by the US and China to come to a limited trade deal, a month after the two countries called a truce in their trade war.

The logjam centres on whether the US has agreed to remove ­existing tariffs in the so-called “phase one” deal the two countries have been working towards — or whether the US would cancel only tariffs set to take effect on December 15, sources said.

“The US negotiators will try to exact the maximum they can before doing anything” on tariff relief, one source said.

Donald Trump on Tuesday said a “significant phase-one trade deal with China could happen, could happen soon”.

The President added he was prepared to increase pressure on China if the two sides can’t reach an agreement.

“If we don’t make a deal, we’re going to substantially raise those tariffs, they’re going to be raised very substantially,” Mr Trump said in a speech to the Economic Club of New York.

The US has wanted to use the leverage from tariffs as part of an enforcement mechanism where tariffs would come down and stay down only if China complied with its commitments under the deal.

US trade representative Robert Lighthizer initially opposed a move to add new tariffs of $US111bn ($162bn) in consumer goods on September 1.

Despite those reservations, Mr Lighthizer sees the latest tariffs, now US policy, as leverage and isn’t eager to eliminate them without commitments from Beijing.

A spokesman for Mr Lighthizer didn’t immediately respond to a request for comment. A spokesman for the Chinese embassy in Washington didn’t immediately respond to a request for comment.

A Chinese Foreign Ministry spokesman on Monday said there was “nothing further to update” on the tariff dispute.

“The sooner China starts making the kind of structural changes President Trump is asking for, the better it will be for China,” said Stephen Vaughn, former top deputy to Mr Lighthizer and a partner at law firm King & Spalding in Washington.

Mr Trump’s tone was more optimistic on October 11 after he met Chinese Vice-Premier Liu He in the White House and said the two nations expected to reach a final agreement that could be signed in “three, four or five weeks.”

The tariff fight broke into the open last week when China’s Commerce Ministry said the US and China had both agreed to roll back their tit-for-tat tariffs as part of the phase-one deal.

The Chinese statement was later contradicted by Mr Trump, a strong advocate of the tariffs that are generating about $US7bn a month for the US Treasury.

“These teams just don’t seem capable of closing negotiations,” said Wendy Cutler, a former senior trade negotiator in the Obama administration and managing director of the Asia Society Policy Institute in Washington.

The path to closing the phase-one deal was hurt by the decision by Chile’s government to cancel this week’s planned Asia-Pacific summit, the likely venue for Mr Trump and China’s President Xi Jinping to sign an accord.

Rigid diplomatic protocol and divisive issues make it hard for Washington and Beijing to schedule another meeting to sign the deal. Both leaders need to be present for any pact to have sufficient force and staying power.

China may have counted on that opposition in the Trump administration and the US business community in its campaign to roll back tariffs, according to people following the talks.

“They are dying to make a deal,” Mr Trump said of the Chinese side on Tuesday, adding “we are the ones deciding whether or not we want to make a deal”.