March 4, 2019 / 1:03 PM / 8 months ago

U.S., China 'on the cusp' of possible end to trade war: Pompeo

WASHINGTON/BEIJING (Reuters) - U.S. Secretary of State Mike Pompeo said on Monday he thought the United States and China were “on the cusp” of a deal to end their trade war, adding to positive signs about negotiations from both sides of the Pacific.

FILE PHOTO: U.S. Secretary of State Mike Pompeo is seen near Chinese State Councilor and Foreign Minister Wang Yi before a meeting at the Diaoyutai State Guesthouse in Beijing, China October 8, 2018. Daisuke Suzuki/Pool via Reuters/File Photo

Pompeo, in a series of interviews with Iowa radio and television stations, said he hoped a deal could be agreed in coming weeks to make trade between the world’s two largest economies fairer and eliminate China’s retaliatory tariffs on Iowa farm commodities such as soybeans.

“We’re trying to get that rectified, get that fixed, make it fair and reciprocal and I think we’re on the cusp of doing that and I hope all those tariffs will go away, all those barriers,” Pompeo told KCCI television in Des Moines, where he was attending a farmers conference.

His comments echoed positive sentiments earlier on Monday from White House economic adviser Kevin Hassett and a spokesman for China’s parliament.

Hassett told Fox Business Network a deal with China was now possible, given recent progress in talks reported by U.S. Trade Representative Robert Lighthizer.

“I think that it looks like Ambassador Lighthizer has made a lot of progress, and we might get there on China,” Hassett said, adding that details of any deal were still being worked out.

“I think everybody’s hopeful, as the markets are, that this is going to get to the finish line sometime soon,” Hassett said.

The United States has demanded that China make substantial changes to its laws and practices to protect U.S. intellectual property, end forced transfers of U.S. technology to Chinese firms, curb generous industrial subsidies and open the domestic market to U.S. companies.

In addition, Washington has sought increased Chinese purchases of U.S. goods, including farm and energy commodities and manufactured products, to reduce a U.S. trade deficit with China that USTR estimates at more than $417 billion for 2018.

ENFORCEMENT NOT AGREED

People familiar with the talks told Reuters the two sides still had substantial work ahead to reach agreement on a way to ensure China’s follow through on any pledges. Talks could still collapse if a deal cannot be reached on enforcement of these so-called “structural” issues.

“We are hearing things are pretty far along and the enforcement issues are the biggest sticking point,” said Erin Ennis, senior vice president of the U.S.-China Business Council, a group representing U.S. firms doing business in China.

While progress has been made on language to address U.S. demands on IP, subsidies and market access, she added: “It would be difficult to finalize the negotiation if the enforcement plan isn’t worked out.”

In Beijing, some Chinese officials and trade experts say they now increasingly anticipate any concessions to fall short of massive changes to China’s state-driven economic model sought by the Trump administration. But with President Donald Trump backing away from a March 1 deadline to raise tariffs on Chinese goods, signs of slowing U.S. growth and a re-election campaign heating up, they say Trump’s appetite to hold out for deep, immediate changes may be waning.

World markets were buoyed early on Monday by investors’ optimism for a deal, but U.S. stocks closed lower after U.S. construction spending data for December fell unexpectedly, causing concerns that fourth quarter growth was weaker than estimated. [.N]

In Beijing, Zhang Yesui, spokesman for China’s parliament, said that China and countries around the world welcomed “substantive progress” in the trade talks.

“We hope that both sides can continue to step up consultations, to reach a mutually-beneficial, win-win agreement,” Zhang told a news briefing ahead of Tuesday’s opening of China’s largely rubber-stamp parliament.

SOME TARIFFS MAY STAY

Goldman Sachs said in a note to clients that Trump and Chinese President Xi Jinping appear “more likely” to strike a deal that lifts some tariffs when they meet later in March.

“Our base case is that an agreement would leave some US tariffs in place, potentially lifting them in stages as various commitments under the agreement have been met. We nevertheless expect some US tariffs to remain in place into 2020,” the investment bank said.

It added that oil, liquefied natural gas and other energy products would likely have the biggest potential to fuel U.S. export growth to China under such an agreement.

FILE PHOTO: Trump economic adviser Kevin Hassett gestures as he speaks during a news briefing at the White House in Washington, U.S., September 10, 2018. REUTERS/Kevin Lamarque

On Sunday, Trump said on Twitter that trade talks were progressing well and that he had asked China to immediately remove all tariffs on U.S. agricultural products while delaying his own plan to impose 25 percent tariffs on Chinese goods.

A summit between Trump and Xi could occur around March 27 to finalize a deal, the Wall Street Journal reported on Sunday, citing a source briefed on negotiations.

A representative for the White House declined comment on the ongoing negotiations.

Additional reporting by Doina Chiacu, Susan Heavey and Steve Holland in Washington and Michael Martina in Beijing; Editing by Jeffrey Benkoe and Tom Brown

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