Trump retreats from China tariffs amid White House trade discord

[WASHINGTON] 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.

Mr 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 Mr 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 at least 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.

Mr Bannon blamed Mr Mnuchin. Mr 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.”

Some White House officials blame poor coordination among the warring factions in Mr 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 Mr 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 this month, Mr Navarro and Mr Mnuchin argued about the US negotiating position, and Mr Navarro wasn’t deeply involved last week in negotiations with a Chinese delegation in Washington.

The divisions are apparent in Mr Trump’s public actions. In April, the Commerce Department cut off Chinese telecommunications company ZTE Corp 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.

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

The Wall Street Journal reported that China and the US have agreed on the “broad outline” of a settlement to the seven-year ban on ZTE.

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

The White House said in a statement on Monday 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.

Looming large over negotiations with China are separate but inextricable talks with North Korea over its nuclear weapons program. Mr 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.

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 Mr Trump and Mr Kim. Mr Trump suggested himself that Mr Xi was pulling strings in Pyongyang to put pressure on US trade negotiators.

White House officials think Mr Trump could take a harder line on China after the North Korea summit, the people briefed on administration discussions said.

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

“It would be catastrophic,” Senator Chuck Grassley of Iowa said. The Chinese had targeted soya beans, 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 Mr 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,” Mr DiMicco, who now serves on an advisory committee for the the US Trade Representative, said. “It’s a road we’ve been down for 25 years and has gotten us nothing but trouble - more theft of IP (intellectual property), more stealing and hacking of proprietary information of companies in this country, ever growing trade deficit in manufactured goods.”

BLOOMBERG