BEIJING - China said on Friday, Sept. 13, it was cancelling planned tariff increases on American soybeans and pork, the latest sign of a diplomatic thaw in the U.S.-China trade war that could lead to an interim agreement this fall.
Chinese importers in recent days resumed purchases of American soybeans for the first time since this spring when Beijing called a halt. That standoff was part of China's retaliation against tariffs President Donald Trump had imposed on numerous Chinese products.
China now will "support domestic companies in the purchase of soybeans and pork from the U.S.," Chinese state media outlets reported Friday, citing an unnamed official.
"We seem to be back in the ballgame of doing business with the Chinese," said Jim Sutter, chief executive officer of the U.S. Soybean Export Council in Chesterfield, Mo.
The soybean move capped three days of unexpected improvement in a U.S.-China relationship that had run aground. On Wednesday, China eased tariffs on 16 U.S. products such as alfalfa and lubricant oils. Trump responded by delaying planned U.S. tariff increases on $250 billion of Chinese goods by two weeks, to Oct. 15, to avoid conflicting with the Beijing's plans to celebrate the 70th anniversary of the Chinese revolution on October 1.
With the two governments deeply suspicious of each other after more than a year of fruitless jousting, there is little prospect for reaching any time soon the sprawling agreement that Trump once billed as "the granddaddy of them all."
Instead, the recent flurry of reciprocal moves suggested that the two sides might try to escape their deepening conflict by agreeing first on a partial deal while continuing talks aimed at a comprehensive settlement.
James Green, who until last year managed trade issues for the U.S. Embassy in Beijing, said Chinese officials believe a partial accord would boost Xi's image domestically for managing the difficult U.S. relationship and make China look like a responsible actor on the global stage.
"I think the Chinese side wisely decided that some partial agreement would serve their interests," he said.
While some analysts have suggested that Trump may feel pressure to seek a partial deal amid complaints that the trade war is hurting the economy, that's not how China hawks in the White House see it.
Recent economic data, including Friday's retail sales figures, have been strong and the stock market has recovered. The administration feels it is close to securing congressional action on the U.S.-Mexico-Canada trade deal and is closing in on other deals with Japan and India.
"An interim deal would be opposed by some in the Trump administration who would see it as giving up leverage, but it would be welcomed by the business community," said John Frisbie, managing director of Hills & Co. "A full deal might be too big a task right now, given the level of distrust between the two sides."
Still, Trump and his senior officials have made inconsistent statements on prospects for an interim deal involving a rollback of tariffs in return for accelerated Chinese purchases of American products and commitments to strengthen intellectual property safeguards.
"I'd rather get the whole deal done. We've taken in many, many billions of dollars of tariffs. I'd rather get the entire Chinese done -- look, if we're going to do the deal, let's get it done," the president told reporters Thursday before flying to Baltimore. "A lot of people are talking about it, and I see a lot of analysts are saying an interim deal, meaning we'll do pieces of it -- the easy ones first. But there's no easy or hard. There's a deal or there's not a deal. But it's something we would consider, I guess."
U.S. and Chinese negotiators by early May had agreed on 90 percent of a trade deal that stretched beyond 150 pages, according to Treasury Secretary Steven Mnuchin. But Chinese President Xi Jinping balked at enshrining key provisions in the country's legal code, leading to the talks' collapse, according to U.S. officials.
Since then, relations have deteriorated as Trump lashed out with additional tariffs, barred Huawei, one of China's most prominent global firms, from purchasing American computer chips, and China retaliated.
The Chinese and American presidents agreed in Osaka, Japan, to revive the talks at the end of June. But despite a trip to Shanghai by Mnuchin and Robert Lighthizer, the chief U.S. trade negotiator, the two sides remain far apart.
Frustrated by the lack of progress, Trump last month announced a further series of tariff increases that would apply by mid-December to nearly every product the U.S. imports from China.
"Investors have been pummeled by the Trump administration trade moves so much they have gotten whiplash," Andrew Collier, managing director of Orient Capital Research in Hong Kong, said via email. "However, there is a growing consensus that Trump needs a deal in order to help the economy before the election in 2020...He will probably agree to concessions on China market access and purchase of US goods and call it a win. China would be happy to get the trade war behind them and focus on their real problem - the slowing economy."
Working-level discussions between U.S. and Chinese officials are scheduled next week in Washington. Assuming they go well, Chinese Vice Premier Liu He is scheduled to meet with Lighthizer and Mnuchin in Washington during the first half of October.
James Zimmerman, the former chairman of the American Chamber of Commerce in China, called the latest Chinese move "a gesture, but not an incredibly significant one...an unsteady truce before the October round of negotiations."
China has long offered to buy soybeans from farmers who comprise Trump's voter base to appease the president and narrow the trade deficit, a measurement Trump cites frequently. The exclusion on pork tariffs will also help ease pork prices in China at a time when the country is suffering a major shortage of its most popular meat and prices have skyrocketed 50 percent in just two months as a result of an African swine fever outbreak.
The agricultural purchases, however, do not necessarily reflect a sweeping turnaround in U.S.-China relations. The Chinese government has authorized a handful of firms to resume U.S. soybean purchases, according to Sutter, the export council head. Up to 1 million metric tons of soybeans has been ordered via the Port of Seattle/Tacoma for shipment to China in October, he said.
Analysts say it's still unclear whether China would agree to thornier U.S. demands, involving structural changes to its state-directed economic model.
"Given the broad range of difficult economic and security issues in U.S.-China relations, a comprehensive deal was never in the cards," said Andrew Rothman, an investment strategist at Matthews Asia in San Francisco. "A partial deal that both sides live up to could be a roadmap for a more complete trade agreement."
This is article was written by Gerry Shih, a reporter for The Washington Post.