Mnuchin and Ross talk tough to China over trade deficit

The Trump administration claimed a “very big step forward” had been achieved toward addressing the trade deficit with China as two of the president’s top economic lieutenants said they expected to hold discussions with Beijing on targets aimed at paring back the imbalance. 

Speaking to the Financial Times after two days of talks with Chinese representatives, Steven Mnuchin, Treasury secretary, said Beijing had “heard the direction of the marching orders” President Donald Trump had given his team and that the two sides were ready to work towards a specific plan on the deficit. Wilbur Ross, the Commerce secretary, said he expected to negotiate dates and targets in tackling the trade gap with China. 

There was no immediate response from the Chinese to the Trump administration’s summary of the talks in Washington, which were part of the two countries’ Comprehensive Economic Dialogue. 

“President Trump has been very clear that our objective is to have a more balanced and reciprocal trading relationship with them. We have made that very clear to them,” said Mr Mnuchin, sitting alongside Mr Ross in the Treasury building. “It is a very big step forward that they have acknowledged that it is a mutual goal and they understand that Secretary Ross and I are reporting results to President Trump and they will be reporting results to President Xi and this president expects action.” 

One person briefed on the discussions said that behind closed doors Wednesday’s talks had been “quite tough” and that Mr Trump’s negotiators had also adopted a more robust approach than earlier this year. They “did not want to settle for the crumbs the Chinese were offering across a range of issues”, especially after being criticised for being outplayed by their Chinese counterparts earlier this year, the person said. 

But that left few concrete achievements from the two days of discussion and much heavy lifting ahead on reducing America’s $309bn goods and services deficit with China. The person briefed on the talks argued scepticism was in order: “The idea of working out details later with the Chinese on an issue as contentious as the trade deficit suggests the dialogue did not go as planned or well.”

Mr Mnuchin said that “very specific targets” would be discussed sector-by-sector in coming talks. Mr Ross added: “Those have to be negotiated as we refine what the targets are and reasonable periods for deliverability.” 

“Whether it is opening financial services, whether it is talking about tech companies being on a level playing field, whether it is opening their markets, our objective is to increase exports substantially to China so that American workers and American companies can compete on a level playing field,” said Mr Mnuchin. 

Wang Yang, China’s vice-premier, and other Chinese officials arrived in Washington eager to avoid any further tensions amid continuing concerns about the possible eruption of a trade war. 

“Dialogue cannot immediately address all differences but confrontation will immediately damage the interests of both,” Mr Wang said at an opening ceremony for the talks on Wednesday. “We can think like a champion but we don’t need to defeat each other in [tackling] our differences. Pursuing co-operation is the best way forward.” 

During the discussions the two sides intensified their dialogue over steel, amid threats by President Trump to impose new curbs on imports of the metal in the name of US national security. Mr Mnuchin said there had been progress on steel but he declined to give any details. Asked about America’s future intentions, he said: “We are not going to comment on any specific options; we are just going to say all options are open. And the steel issue is not just a China issue.” 

In May the two sides announced an “early harvest” deal clearing the way for US beef exports to China and helping to open up the Chinese market for US credit rating agencies and LNG exports. Mr Mnuchin pointed to the beef agreement as a sign of things to come. 

Yet economists have said small deals like those are likely to do little to reduce the trade imbalance. The US last year recorded a goods and services deficit with China that was more than triple its deficit with the EU and by far the largest among its trading partners. The deficit has also continued to grow, in goods alone reaching more than $138bn in the first five months of this year, up from $131bn in the same period last year. 

The Chinese have argued that the US should lift its own export barriers, particularly on sensitive high-tech products. “There is huge market potential to tap for US exports of advanced technologies . . . to China,” Mr Yang told a chief executives meeting in Washington on Tuesday, blaming “outdated US regulations on export controls” for US companies not getting “their fair share of the cake”. 

China’s imports of integrated circuits were worth $227bn last year, he said, and more than imports of crude oil, iron ore and primary plastics combined. “But only 4 per cent of China’s [integrated circuits] import[s] came from the United States.” 

But many of those restrictions are related to US national security concerns and the widespread belief in Washington that many Chinese companies have engaged in industrial espionage and imported many such US goods only to copy them and produce their own.

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