Citing positive talks with Chinese officials, President Donald Trump delayed the March 1 deadline to increase tariffs on Chinese imports last Sunday. According to the New York Times, Trump said that he and Chinese officials made compromises on issues that have plagued their ongoing discussions, such as China requiring U.S. companies hand over intellectual property and technology in exchange for doing business in China, as well as Trump’s demand that China purchases more agricultural and energy products from the U.S.
This is all just talk for the time being, however positive, as neither party signed any sort of official agreement. But, this is positive in that it, even temporarily, keeps the U.S. from increasing tariffs on $200 billion in Chinese exports from 10 percent to 25 percent.
I am pleased to report that the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues. As a result of these very……
— Donald J. Trump (@realDonaldTrump) February 24, 2019
….productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1. Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement. A very good weekend for U.S. & China!
— Donald J. Trump (@realDonaldTrump) February 24, 2019
On Friday, the president tweeted that he has asked China to lift its own tariffs on U.S. agriculture products “based on the fact that we are moving along nicely with Trade discussions and I did not increase their second traunch of Tariffs to 25 percent on March 1st.”
China currently has tariffs placed on $110 billion in U.S. products, per BBC.
Looking at these back-and-forths between the two countries optimistically, assuming that we’ll sort out a legal conclusion where both parties are as close to happy as possible, what can we realistically expect? Analysts at Goldman Sachs hypothesized that, long story short, some U.S. tariffs will remain in place, but could be lifted incrementally as the two parties meet agreed-upon milestones. They also think it will be a three-phase process.
CNBC writes:
Most immediately, U.S. and Chinese officials are likely to continue meeting over the next few weeks to work out differences on the outstanding issues.
The second phase will likely result in a Trump-Xi meeting in late March where unresolved issues are ironed out, said the investment bank.
If the Florida meeting takes place, Goldman predicts there would be a 75 percent probability that the two presidents announce a formal agreement of some kind.
The ongoing negotiations have included thorny issues between both countries, such as enforcing punishment for intellectual property theft, technology transfer and structural reforms related to trade and economic policies.
“That said, we expect that whatever is agreed at that point will lack specifics in many areas and that additional technical work will still need to be done after the presidential meeting takes places,” it said.
The third phase—which would be the most unclear in terms of outcome—is enforcement of the agreement, where the issue of tariff rates will raise some uncertainty, according to the Goldman report.
This is a lot of speculation and a lot of good news mixed in with uncertainty, as has been the case for a lot of the ongoing tariff development.
Whether things go according to what Goldman Sachs anticipate remains to be seen.
