WASHINGTON—In the strongest sign yet that an accord is near, U.S. Trade Representative Robert Lighthizer said Wednesday that the U.S. was abandoning for now its threat to raise tariffs to 25% on $200 billion of Chinese goods.
His comments came following a House Ways and Means Committee meeting where Mr. Lighthizer said that the U.S. and China have reached a tentative agreement on a mechanism to enforce the trade deal, which has long been a stumbling block in talks.
In a response to a question after, Mr. Lighthizer said that his agency would drop plans to move beyond the 10% tariffs now in force. Several hours later his office filed papers to “suspend the scheduled tariff increase until further notice.” Mr. Trump had said Sunday the higher tariffs would be delayed but didn’t give a time frame.
The threat of higher tariffs had shaken world markets and forced U.S. businesses to consider moving operations out of China—while also pressuring Beijing to negotiate a cease-fire. Now, U.S. and Chinese officials suggest the two countries are poised to finish a deal over the next month following a likely summit between Mr. Trump and Chinese President Xi Jinping at Mr. Trump’s Mar-a-Lago estate in Florida.
“It does appear that over the past week of negotiations progress was made in areas of importance to the business community,” said Myron Brilliant, executive vice president of the U.S. Chamber of Commerce, which has pressed the administration to focus on Chinese industrial policies and intellectual property protection.
During his House testimony Mr. Lighthizer gave a preview of some of the important provisions—those involving enforcement and currency manipulation. He said a deal with China would allow the U.S. to use tariffs to enforce a deal, but only after a series of consultations with Beijing.
Complaints of violations of the accord would be discussed in a series of consultations, he said—monthly by staffers, quarterly by vice ministers and twice-yearly by ministers of the two nations. That last would likely mean Mr. Lighthizer and Chinese Vice Premier Liu He, China’s special envoy on trade.
Those consultations would look at individual complaints—sometimes brought anonymously by companies fearing retaliation—and also problems that appear to be part of a pattern. The goal, he said could be to resolve the problems at the lowest possible level.
The discussions are meant to address complaints by Chinese negotiators that the U.S. has been proposing to enforce any deal unilaterally—essentially acting as a judge and jury of any alleged Chinese violations.
“Consultations are a good thing for the long run” relations between the two nations” said Fred Bergsten, founder of the Peterson Institute for International Economics, a free-trade think tank. Keeping the threat of trade sanctions “puts teeth into the agreement,” he said.
But if the talks fail to resolve the issues, Mr. Lighthizer said, the U.S. would impose tariffs—essentially what trade experts call a “snap-back” provision. “Without that sort of thing then to me we don’t have real commitments,” Mr. Lighthizer said.
A final pact would likely have other enforcement provisions too, said U.S. trade officials.
Mr. Lighthizer’s comments were the most detailed yet on the issue of enforcement, which has been a major concern of business groups. During high-level talks in Washington last week, some observers detected a widening rift between Mr. Lighthizer—a China hard-liner—and Mr. Trump, who is seen as increasingly eager to strike a deal.
The trade representative also gave some details about the currency accord the two sides are discussing. He said it consisted of two parts: pledges by China not to engage in competitive devaluations and to be transparent in terms of its intervention in the markets.
That arrangement is similar to what the U.S. negotiated with Mexico and Canada in the revisions to the North American Free Trade Agreement. Only the transparency pledge in that accord is enforceable.
Mr. Lighthizer stressed that the U.S. and China hadn’t completed talks, and that the provisions he discussed would only come into effect if the two sides reach a final deal.
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Rep. Lloyd Doggett, a Texas Democrat, said any deal known as a “trade agreement” that lowers tariffs should get a vote in Congress, which has power over taxes and tariffs.
Mr. Lighthizer countered that the deal with China would be an executive agreement as allowed by the U.S. Constitution, with changes in tariffs allowed under laws passed by Congress delegating tariff authority to the executive branch.
Mr. Lighthizer also concurred with remarks by Rep. Kevin Brady (R., Texas), who cited an intellectual property infringement lawsuit filed by Huntsman Corp. in China more than a decade ago that is still dragging on as an example of China’s broken promises.
“The Huntsman example is unfortunately one of many, many thousands,” Mr. Lighthizer responded.
As the Wall Street Journal reported last year, Texas-based Huntsman has filed suit against a Shanghai company for infringing its patent on a black dye used in textiles that can be produced with minimal environmental impact.
The company has struggled to get positive Chinese court rulings, and has asked the Trump administration to consider blocking Chinese firms if they set up operations in the U.S. using disputed Huntsman technology.
Lingling Wei in Beijing contributed to this article.
Write to Bob Davis at bob.davis@wsj.com and William Mauldin at william.mauldin@wsj.com