Is the Trump administration losing the China trade war?
May 25 2018 by Lorena Waters
As the two sides stepped back from a full-blown trade war, Washington neared a deal on Tuesday to lift its ban on usa firms supplying Chinese telecoms gear maker ZTE Corp (000063.SZ) (0763.HK), and Beijing announced tariff cuts on vehicle imports. BMW sold almost 107,000 USA -made vehicles to China past year, while Mercedes-Benz sold more than 72,000, according to LMC Automotive. But Trump said on Tuesday that he had agreed to re-examine the matter as a personal favour to Chinese President Xi Jinping.
Any firm deal is likely to take a long time, according to most observers, and USA officials have threatened to return to tariffs, which prompted the current standoff, if needed.
In March of a year ago, the company pleaded guilty to illegally shipping us technology to Iran and North Korea and paid a penalty of $892 million. According to the Wall Street Journal, the US will lift its ban on American companies selling components and software to ZTE; in exchange, ZTE will be forced to make significant changes to its management teams, and possibly pay hefty fines.
However, ZTE will still have to face "harsh" punishment that will include changes of management and board, and possibly a fine.
The U.S. ban on ZTE for breaching terms of a settlement over sanction-breaking sales to Iran and North Korea has become entwined in the trade dispute between the U.S. and China. Representatives for China's Foreign Ministry did not immediately respond to a request for comment on Trump's statement. And I think things changed after that meeting so I can't say that I am happy about it. China's trade surplus with the USA was a record $375 billion in 2017.
There's no denying that stubborn imbalances have built up in the United States' bilateral economic relationship with China; nor have past administrations succeeded in getting Beijing to address those through conventional diplomatic means. Mnuchin said that the US will hold off on the potential of $150 billion in additional USA tariffs on Chinese imports as the nations continue trade negotiations. It has also been reported that ZTE may be required to increase the quantity of hardware it buys from American companies. In his quest to protect the auto industry, he's even considering throwing up new tariffs on vehicle imports, making the (ridiculous) assertion that they're necessary for national security.
His team has been trying to hash out a deal to boost USA exports, but multiple rounds of negotiations have yet to yield progress on key priorities, like protection for U.S. intellectual property.
Mr Trump said there was no deal yet but at the request of Chinese President Xi Jinping he is revisiting last month's ban, which blocks United States companies from exporting to ZTE.
In a 32-2 vote, the Senate Banking Committee advanced legislation Tuesday that limited the president's ability to ease sanctions on Chinese telecom companies, requiring the administration first prove to Congress that the company is complying with USA law.
"Doesn't make sense to have the Treasury secretary negotiating trade policy - that's the USTR's job", former Nucor chief executive Dan DiMicco said in a phone interview on Tuesday.
"There are certain conditions we want to happen". China vowed to retaliate in kind, sparking fear of a trade war.
But analysts noted that the joint statement issued at the end of the most recent round of negotiations did not include a target for the increased purchases, despite earlier U.S. claims the increase could amount to as much as $200bn.