WASHINGTON - Deal or no deal? Trade talks between the U.S. and China -- the world’s two largest economies -- have reached a critical phase.
Yet mixed signals coming from the White House and Beijing are causing analysts to question whether President Donald Trump and his Chinese counterpart, President Xi Jinping, will be able to finalize an agreement to end a costly trade war by early April as originally predicted.
White House press secretary Sarah Sanders told reporters on Monday that the two sides haven’t set a date yet for a signing summit between Trump and Xi to end the dueling tariffs that are hurting both countries’ economies. In an appearance on Fox News over the weekend, White House economic adviser Larry Kudlow said that negotiations are "making great progress."
However, last week the Chinese side reportedly canceled tentative plans to have Xi travel to President Trump’s Florida retreat, Mar-a-Lago, at the beginning of April for a signing ceremony, causing some analysts to question whether an agreement is truly imminent. Trump has repeatedly touted progress in the talks, but warned that he would pull out of the negotiations if he concluded he wasn’t getting a good enough deal.
"He’s going to make a deal if it’s in the best interest of America," Sanders said. "If he doesn’t feel like it’s a good deal, it’s not worth just signing a piece of paper."
Any deal negotiators reach is likely to address U.S. concerns with what it sees as unfair trade practices by the Chinese government to advantage its domestic industries over foreign competitors. It is also expected to include provisions that would reduce the trade deficit between the two countries, most likely through Chinese government-directed purchases of U.S. commodities, like soybeans and liquefied natural gas.
Hanging in the balance is a crucial relationship that accounted for $710 billion in two-way trade in 2017, according to the Office of the U.S. Trade Representative. That trade also supported about 911,000 U.S. jobs in 2015, the latest year for which that data is available.
But the political stakes for the two leaders are nearly as great as the economic ones. And both Trump and Xi must be able to extract major concessions from the other in order for the negotiations to be successfully concluded, analysts say.
"If an agreement is finally reached between China and the United States in the trade war, it will certainly be a win-win outcome," said Mei Xinyu, a researcher with the Chinese Academy of International Trade and Economic Cooperation in Beijing. "If one side wins and the other side loses, an agreement cannot be reached."
Trump is coming off a failed nuclear summit with North Korean dictator Kim Jong Un last month, undercutting his claims of deal-making mastery.
The White House has been praising Trump’s decision to use tariffs on a wide array of Chinese goods to drag Beijing to the negotiating table. However, despite the president’s claims to the contrary, economists have found that the full burden of the tariffs is actually being passed on to U.S. manufacturers and consumers in the form of higher prices, while U.S. farmers are being punished by retaliatory sanctions levied by China.
In addition, last week the administration received two doses of bad economic news. On Friday, the Labor Department reported surprisingly low job growth in February. That followed the announcement by the Commerce Department on Tuesday that the U.S. trade deficit, excluding services, hit its highest level in history at $891 billion in 2018. (Including services, on which the U.S. runs a surplus, the total trade deficit was $621 billion, a 12.5 percent increase over the previous year.)
The factors driving the increased trade deficit are many and varied, and often have little or no connection to the administration’s trade policies. But for President Trump, who promised to quickly eliminate the trade deficit, those numbers pose a real political problem.
While President Xi currently faces no major challenge to his leadership of China -- he is effectively president for life -- a slowing economy and a stock market battered by fallout from the trade dispute make reaching a deal at least as much of a priority for him as it is for Trump.
Striking an agreement with Trump on a large package of Chinese purchases of American agriculture and manufacturing products will be "the easiest thing" for the Chinese to do, "because it doesn’t force them to make any internal change in their economy," said William Reinsch of the Center for Strategic and International Studies.