Fin24.com | Trump retreats from China tariffs amid White House trade discord

US President Donald Trump retreated from imposing tariffs on billions of dollars‘ worth of Chinese goods because of White House discord over trade strategy and concern about harming negotiations with North Korea, according to people briefed on the administration’s deliberations.

Trump also succumbed to pressure from farm-state Republicans, who heavily lobbied the White House to resolve its trade differences with China, which had especially targeted US agricultural products with planned retaliatory tariffs.

Treasury Secretary Steven Mnuchin said on Sunday that the administration’s plan to impose tariffs had been suspended, and Trump said on Twitter on Monday that the Chinese had agreed to purchase unspecified amounts of American farm products. Some of his loyalists led by former chief strategist Steven Bannon criticised the deal as a capitulation.

The agreement delays a trade war between the world’s two largest economies, a prospect that has rattled financial markets for months. But many US concerns about China’s economic practices remain unresolved: its acquisition of American technologies; the country’s plans to subsidise the growth of advanced domestic industries such as artificial intelligence and clean energy; and US companies’ access to China’s markets.

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Bannon blamed Mnuchin. Trump “changed the dynamic regarding China but in one weekend Secretary Mnuchin has given it away,” he said in an interview. “Mnuchin has completely misread the geopolitical, military, and historical precedents, and what President Trump had done was finally put the Chinese on their back heels.”

Warring factions

Some White House officials blame poor coordination among the warring factions in Trump’s economic team for the retreat, according to several people briefed on the matter. Within the administration, divisions are raw between free-trade supporters such as Mnuchin and White House economic adviser Larry Kudlow and China hawks led by White House trade adviser Peter Navarro.

During a trip to Beijing earlier in May, Navarro and Mnuchin argued about the US negotiating position, and Navarro wasn’t deeply involved in negotiations with a Chinese delegation in Washington.

The divisions are apparent in Trump’s public actions. In April, the Commerce Department cut off Chinese telecommunications company ZTE from its American suppliers in response to what Commerce Secretary Wilbur Ross called “egregious” violations of US sanctions against doing business in Iran and North Korea.

Trump reversed the action via tweet a week ago, declaring that it would cost “too many jobs in China.”

“China is pushing the president around, and he seems to accept it,” Senator Chuck Schumer of New York said in a speech on Monday. “The way to win real concessions from China is to stay tough, not to bluster and back off at the first sign of friction.”

While Schumer is a Democrat, he has consistently complimented Trump’s confrontation of China.

The White House said in a statement on Monday night that “the president and his entire administration are committed to ending decades of unfair and illegal trading practices that harm our farmers, workers and many other parts of the US economy.”

“The president will not back down until we see meaningful and lasting change,” the White House added.

North Korea

Looming large over negotiations with China are separate but inextricable talks with North Korea over its nuclear weapons programme. Trump is counting on Chinese President Xi Jinping to maintain pressure on North Korean leader Kim Jong Un, whose country is economically dependent on China, with which it shares a border.

Last week, North Korea’s state-run news agency and top officials began issuing threats to back out of a planned June 12 summit in Singapore between Trump and Kim. Trump, who has publicly entertained the idea he may win the Nobel Peace Prize for brokering a peace deal with Kim, suggested himself that Xi was pulling strings in Pyongyang to put pressure on US trade negotiators.

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White House officials think that Trump could try to re-establish a harder line toward China after the North Korea summit, the people briefed on administration discussions said.

Some Republicans warned Trump that congressional seats held by their party that should have been safe in midterm elections were endangered by the trade dispute. Several farm-state lawmakers expressed relief that a damaging round of tariffs and counter-tariffs is – for now – no longer on the horizon.

‘Catastrophic‘ tariffs

“It would be catastrophic,” Senator Chuck Grassley of Iowa said. The Chinese had targeted soybeans, one of his state’s top exports to the country, as one product for retaliatory tariffs.

“We have made the case to the White House at least twice in the last four months,” he said in an interview.

But Trump loyalists including Bannon and campaign trade adviser Dan DiMicco were among the loudest critics of the president’s retreat.

“It gives the appearance that the Chinese are doing what they’ve always done to us: put in significant delay tactics. It’s a road we’ve been down for 25 years and has gotten us nothing but trouble – more theft of IP, more stealing and hacking of proprietary information of companies in this country, ever growing trade deficit in manufactured goods,” DiMicco, who now serves on an advisory committee for the US Trade Representative, said in a phone interview.

The Trump administration yet has a chance to show strength against China, however. Mnuchin faces a deadline within a day or two to recommend curbs on Chinese investment in American technology firms. The Treasury Department has considered citing an emergency law to prevent the Chinese from investing in – and acquiring – sensitive US technologies.

Publicising the report would show China that the US intends to hold it accountable for trade behaviour the Trump administration considers unfair. A Treasury spokeswoman said on Monday that Mnuchin had updated Trump on the issue, but didn’t say whether any portion of the report would be made public.

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