President Donald Trump on Friday predicted a major US-China trade deal in the near future, saying that Beijing's negotiating position had been weakened by the impact of the tariffs war between the world's top two economies. "China wants to make a big and very comprehensive deal. It could happen, and rather soon!" Trump tweeted.
His optimism followed China's decision earlier Friday to back off from extra punitive duties that had been imposed this summer on US-made cars and auto parts. The move was seen as the first concrete result of the US leader's G20 talks with his counterpart Xi Jinping earlier this month. Those tariffs now fall from 40 percent to 15 percent - the same rate imposed on all foreign-made vehicles. The relief will last for three months from January 1.
"Suspension of the tariffs is a concrete measure to implement the consensus reached by the two heads of state," said the announcement by the State Council's Tariff Commission Office, noting it applied to 211 product codes. Trump said the climbdown showed that China had been forced to blink in their on-off spat, after months of heavy US tariffs on Chinese imports.
"China just announced that their economy is growing much slower than anticipated because of our Trade War with them. They have just suspended U.S. Tariff Hikes. U.S. is doing very well," Trump said. Beijing's move also demonstrated that talks to resolve the trade conflict have survived the tension sparked by Canada's arrest of a top Chinese telecom executive at the behest of US law enforcement.
Meng Wanzhou, chief financial officer of telecoms behemoth Huawei, has been released on bail in Canada. China wants her unconditional release. Washington wants her extradited for allegedly violating US sanctions on Iran. China apparently retaliated by detaining two Canadians on suspicion of "harm to national security" - a phrase often used by Beijing when alleging espionage.
Washington insists that the case is driven purely by the US Justice Department, rather than anything to do with the trade dispute, but Trump has muddied the waters by suggesting he might intervene if that would help the trade talks. Trump and Chinese leader Xi Jinping agreed on the sidelines of the G20 summit in Buenos Aires on December 1 to a 90-day truce while they tried to find a solution to the escalating trade dispute.
Confusion and unease over what agreement the two sides reached in Argentina has roiled stock markets. But trade negotiators talked on the phone this week to discuss a timetable for talks. Friday's announcement in Beijing also confirms what Trump said on December 2 about China acting on the auto tariffs.
"We hope that both sides will - in accordance with the consensus reached by the two heads of state, on the premise of mutual respect, mutual equality, faithfulness, words and actions - intensify consultations in the direction of cancelling all of the extra tariff increases," the State Council's statement said. The tariff suspension will benefit US carmakers like Tesla and Ford which have seen China sales tumble. "It is essential that governments work together to advance balanced and fair trade. We look forward to learning more," a spokesman for Ford said after Trump announced China would cut car tariffs.
International automakers Daimler, maker of the Mercedes-Benz, and BMW have also exported American-made SUVs to China. US exports to China fell 25 percent on-year in November as the higher tariffs on hundreds of American goods hurt demand.
In another signal that China may move to satisfy Trump, the country's top legislature announced Friday that it would hold a session from December 23-29 to discuss legislation on foreign investment and a draft revisions to the patent law. The United States has long complained of a lack of fair access for foreign companies in China and rampant theft of intellectual property.
For now, the National People's Congress Standing Committee has not provided details about the draft legislation. Maintaining and resolving the trade truce could help stabilize sentiment in China, where confidence in the economy has been hurt by the trade frictions with Washington. Earlier on Friday, economic data showed Chinese consumer spending grew at its slowest pace in 15 years and factories eased up in November, raising the prospect that Beijing could turn to fresh stimulus measures to help the sputtering economy. China's top officials on the Politburo said in a statement Thursday that major economic indicators will be kept within a reasonable range next year.