The United States and China have reached a deal on measures to reduce the trade deficit between the two countries. The two largest economies in the world said that they had arrived at a consensus on how to “substantially” reduce the deficit. However, there was no mention of the $200 billion reduction that the US was demanding.
A joint statement was released on Saturday following intense trade negotiations in Washington. The talks were led by Steven Mnuchin, US treasury secretary and Liu He, China’s state council vice-premier. Liu He met President Donald Trump early on Thursday as part of the negotiations. The statement read in part that there was a significant breakthrough as the two countries agreed on ways they can explore to cut down the deficit. The statement also revealed that China had agreed to substantially increase the amount of goods it will purchase from the US in pursuit of “high-quality economic growth.”
The US said that it will continue to pursue more talks with China. Washington is pushing for more consumption of US goods in China. This is seen as an integral strategy to reduce the $300 billion trade deficit that nearly sparked a trade war between the two countries. On the other hand, a statement on Chinese state-run media Xinhua called the agreement a win-win for both countries. According to the statement, the deal presents a good opportunity for the US to narrow down its trade deficit while China will have the chance to diversify the quality of its imports. The Xinhua statement was also quick to note that China had resisted any “unreasonable demands” from the US.
It was reported earlier this month that the US had taken a radical position in the talks by demanding a deficit reduction of $200 billion. It looks like this wasn’t something Beijing was ready to concede. The Chinese government said that it will advance relevant amendments to its laws in order to fully operationalize the agreement. Beijing also confirmed that the two countries had in principle agreed on “meaningful increases” of US agricultural and energy exports to China.
US President Donald Trump had threatened China with $150 billion in tariffs. The President has been a sharp critic of Chinese trade practices and the stance on tariffs could have escalated to a full-blown trade war. China, on the other hand, released proposed tariffs of its own targeting US farmers, most of whom are Trump supporters. Trump and his Chinese counterpart Xi Jinping then appeared to tone down on their approach in order to pave way for negotiations. Finally, it seems a breakthrough could soon be on the cards.
The trade negotiations also came in the backdrop of a highly anticipated summit between the US and North Korea. The US is trying to convince Kim Jong Un to end his country’s nuclear and missile program. China is thought to be an integral player in the talks, and this could have had a bearing on trade negotiations between the two countries. China is North Korea’s biggest trading partner and one of its most powerful allies.