President Donald Trump’s top advisers are rushing to find an escape hatch for a series of tariff increases in the coming months, worried about the potential for further economic damage.
Many of the president’s top economic officials are trying to resurrect the terms they previously were negotiating with China, a deal officials said was “90 percent” done before a sudden impasse this summer, according to a person familiar with the discussions.
That approach was rejected by the Chinese at the time, so it’s unclear whether the new effort will overcome those hurdles and deliver U.S.-sought commitments from China on agriculture, intellectual property and technology transfer.
The goal of the internal administration discussions is to forestall October tariff increases and the next tariffs set to take effect in December, with some advisers arguing that the economic hit is real and must be mitigated prior to the election year. But the discussions remain fluid and Trump has yet to endorse an approach.
The internal discussions were confirmed by two other people close to the talks, who cautioned that nothing has been finalized.
What’s different now is that administration officials are hoping to leverage a possible stalling of additional tariffs to get China to make commitments on intellectual property, said one of the people.
“We are looking for the Chinese to give us what we asked for in May,” the person said.
Meanwhile, Chinese officials have signaled that they are willing to negotiate after Trump’s blowup in July led to a massive escalation in the tariffs. The economic impact of the trade fight on China is not fully known, but economic indicators show that the country’s economy is being hurt.
“The idea is to pull the relationship away from where the president loses his temper and could really hurt them,” said the person, who was recently briefed by Chinese officials.
U.S. and Chinese officials plan to meet later this month to discuss a way forward. Trump on Wednesday evening announced a two-week delay in the next round of tariff increases ahead of those talks.
Trump’s standoff with China has rocked markets throughout the past two years, and the latest debate inside the Trump administration is fueling more volatility with warring leaks. The stock market popped higher Thursday morning after a Bloomberg report about a potential interim trade deal, but then fell back with a CNBC report countering it.
The discussions about some kind of agreement come as the White House holds wide-ranging internal debates about ways to boost economic growth heading into 2020 as data suggest a clear slowdown with the trade wars having an obvious impact, especially on manufacturing.
A China deal is the most obvious way for the White House to affect markets and the economy short of various tax cut ideas being floated that are unlikely to pass Congress.
One of the people close to the talks said deputy-level officials will start meeting next week to set up a potential preliminary deal involving agriculture purchases by China and, on the U.S. side, easing export restrictions on Huawei and potentially more delays to tariff increases.
A primary focus is also likely to be how talks can proceed on core U.S. concerns related to intellectual property, currency, market access and other issues, the person said.
Both sides took steps to ease tensions this week. Trump said on Wednesday that he was delaying plans to impose an additional 5 percent duty on $250 billion worth of Chinese goods until Oct. 15, or two weeks later than scheduled.
The move followed China’s announcement earlier on Wednesday that it was exempting 16 items from the retaliatory tariffs it has imposed on American products in response to Trump’s tariff moves.
Treasury Secretary Steven Mnuchin said Thursday he was “cautiously optimistic” about the chances for reaching an agreement with Beijing.
“We have a deputies meeting planned in the next two weeks where the Chinese will be coming here and they’ll be working on material in advance of the vice premier coming here in the beginning of October to meet with the Ambassador [Robert] Lighthizer and myself,” Mnuchin said on CNBC’s “Squawk Box.” “So, we look forward to hopefully making progress the next few weeks.”
Mnuchin also indicated that the October meeting could be key to reaching an agreement, if positive signals coming out of Beijing are to be believed.
“We need to rebalance this relationship, and they acknowledge it,” Mnuchin said. “So, if China comes here with a proposal that makes sense, we will consider it. We will take it to the president. And again, I’m cautiously optimistic. I take the Chinese in good faith that they want to come here with a deal.”
Doug Palmer contributed to this report.
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