The United States and China are close to agreement on the first phase of a trade deal, US President Donald Trump said on Tuesday, after top negotiators from the two countries spoke by telephone and agreed to keep working on remaining issues.
Trump said Washington was in the “final throes” of work on a deal that would defuse a 16-month trade war with Beijing, which has contributed to a slump in China’s industrial profits.
China announced on Wednesday that its factories recorded their steepest fall in profits in eight months in October, down 9.9 percent to 427.56 billion yuan ($60.74bn) as slowing demand at home and pressures from the trade war dragged earnings down.
Trump said that a trade deal was near, but also underscored Washington’s support for protesters in Hong Kong, a potential huge sore point with China.
“We’re in the final throes of a very important deal, I guess you could say one of the most important deals in trade ever. It’s going very well but at the same time we want to see it go well in Hong Kong,” Trump told reporters at the White House.
China said it had summoned US Ambassador Terry Branstad on Monday to protest the passage in the US Congress of the Hong Kong Human Rights and Democracy Act, saying the bill amounted to interference in a Chinese internal matter.
Trump said that he had a very good relationship with Chinese President Xi Jinping and expected him to ensure a positive outcome in the Chinese-ruled city of Hong Kong, where pro-democracy parties won almost 90 percent of 452 district council seats in Sunday’s elections.
“I think that President Xi can make that happen. I know him and I know he’d like to make it happen,” Trump said, without elaborating on what exactly he expected Xi to do.
The president said later on Tuesday in an interview with former Fox News host Bill O’Reilly that he is holding up the trade deal to ensure better terms for the US.
“I’m holding it up because it’s got to be a good deal,” he said in the interview for O’Reilly’s website. “We can’t make a deal that’s like, even. We have to make a deal where we do much better because we have to catch up.”
Trump’s upbeat comments about the trade talks lifted markets, with Wall Street’s three largest indexes hitting all-time highs on Tuesday.
Asian shares followed these gains on Wednesday morning, with MSCI’s broadest index of Asia Pacific shares outside Japan up 0.14 percent. Japan’s Nikkei rose 0.41 percent while Australian shares gained 0.46 percent.
Trump’s remarks followed a telephone call on Tuesday by US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin with Chinese Vice Premier Liu that was disclosed by China’s Commerce Ministry.
It said the negotiators discussed core issues related to the phase one deal and reached “a common understanding on resolving relevant problems.”
Completion of a phase one deal had been expected in November, but trade experts and people close to the White House said last week it could slide into the new year, given China’s pressure for more extensive tariff rollbacks.
This includes a 15 percent tariff implemented on $125bn worth of Chinese goods on September 1 and earlier 25 percent tariffs levied on industrial and consumer imports to the US from China.
If a phase-one deal does not materialise before December 15, Trump will have to choose whether to carry out his previous threat to impose 15 percent tariffs on some $160bn in imports from China.
White House adviser Kellyanne Conway told Fox News the US and China were “getting really close” on a “phase one” trade deal. She said Trump wanted to “do this in phases, in interim pieces because it’s such a large, historic trade deal.”
Senate Finance Committee Chairman Chuck Grassley, an Iowa Republican, told reporters on Tuesday that he believed the initial deal with China could be done before year-end.
He said China had invited Lighthizer and Mnuchnin to visit Beijing for in-person talks and they were willing to go if they saw “a real chance of getting a final agreement.”
The US trade representative and the Treasury did not respond to requests for comment. A source familiar with the trade talks said the US officials could go to Beijing after Thursday’s Thanksgiving holiday.
In October, Trump said he expected to quickly dive into the second phase of talks once “phase one” had been completed, focusing on harder issues such as Chinese demands that US companies transfer their technology to Chinese rivals.
US and Chinese officials, legislators and trade experts warn such follow-on negotiations may prove difficult given the November 2020 US presidential election, the difficulties in getting the first stage done, and the White House’s reluctance to work with other countries to pressure Beijing.
“We continue to negotiate,” Conway said. “But those forced tech transfers, the theft of intellectual property, the trade imbalance of a half a trillion a year with the world’s second-largest economy, China – this makes no sense to people.
“But the president wants a deal. But President Trump always waits for the best deal,” she said.
Commerce Minister Zhong Shan, central bank governor Yi Gang and vice head of state planner Ning Jizhe also participated in the phone call with the top trade negotiators, Beijing said.