BEIJING/WASHINGTON -- President Trump’s top trade negotiator told him that Beijing was back-tracking on a trade deal following a round of talks last week, angering the president and leading him to threaten on Sunday to raise tariffs on Chinese goods, people familiar with the matter told Bloomberg.
In talks last week in Beijing, Chinese officials told their U.S. counterparts they would not agree to a trade deal that required changes to Chinese law, the people said. China had previously agreed to change its laws in the text of the deal, they said.
The change has major implications for provisions of the deal aimed at ending a Chinese practice of forcing U.S. companies seeking to do business in the country to reveal proprietary technologies and other intellectual property.
The U.S. side, led by Trade Representative Robert Lighthizer, thought that issues around what’s known as forced technology transfer were resolved and considered the Chinese position on changing its laws to be an attempt to renegotiate, the people said. Lighthizer was angered by the move and briefed Trump.
The president then issued a pair of tweets on Sunday criticizing China and threatening to raise tariffs on about $200 billion in goods to 25 percent from 10 percent.
The people familiar with the matter asked not to be identified because the China trade talks are sensitive and have been conducted in secrecy. But official readouts last week from the U.S. and Chinese governments that depicted the latest round of talks in Beijing as productive were overstated, the people said.
Trump’s trade negotiators weren’t particularly surprised by his tweets, the people said. The White House didn’t immediately comment.
A new round of trade talks are expected this week in Washington, but it is unclear whether the Chinese government will send top officials following Trump’s tweets. A Chinese foreign ministry spokesman said on Monday that a delegation would still travel to Washington but would not say when.
Global equities tumbled and Treasury futures climbed following the tweets, which set back investor confidence the U.S. and China would soon resolve their trade war.
The S&P 500 Index fell as much as 1.6 percent on Monday before paring losses. The tweets did considerably more damage in China, where the Shanghai Composite Index sunk 5.6 percent on Monday for its steepest drop in three years, even after state-backed funds were said to step in to cushion the blow.
“We are now trying to get more information on the relevant situation,” China ministry spokesman Geng Shuang told an earlier briefing in Beijing. “What I can tell you is that the Chinese team is preparing to travel to the U.S. for trade talks.”
Deeper concerns
It was unclear whether the threat reflected deeper concerns by Trump, who stunned North Korean leader Kim Jong Un by walking away from their nuclear summit in February, or a negotiating tactic. The U.S. had been targeting May 10 to announce a deal, that would be finalized and signed by Trump and Chinese President Xi Jinping later at an official summit, people familiar with the negotiations said last week.
The two sides have been locked in intense negotiations since last year for an agreement to address U.S. concerns over China’s trade surplus, alleged theft of intellectual property and forced technology transfers. Trump and Xi agreed to a tariff truce on Dec. 1 to allow senior officials time to negotiate.
The truce helped soothe investors concerns about a further escalation in a trade war between the world’s two largest economies, which imposed tariffs on about $360 billion of each other’s good last year. Trump’s latest tweets mark an abrupt reversal in stance for the White House after both sides had been saying for weeks that negotiations were going well.
That shift reflects growing U.S. frustration with China’s backpedaling on some of its earlier commitments, including on the crucial matter of technology transfer, two people familiar with the situation said. That’s emboldened trade hawks within the Trump administration to push for a harder line, including the raising of tariffs, the people said.
'Issuing a warning'
White House economic adviser Larry Kudlow said on Fox News that the president was “issuing a warning.” While “great progress” has been made in the talks, structural and enforcement issues remained, he said.
Trump imposed duties of 25 percent on an initial $50 billion of Chinese goods last year and then 10 percent on an additional $200 billion in products in September. Those duties were set to rise to 25 percent on Jan. 1 and then again on March 1, but Trump delayed that as talks continued. China has imposed tariffs on $110 billion of U.S. exports in retaliation and repeatedly warned it would counter tariffs with actions of its own.
That means there’s a risk China would counter any extension of U.S. levies, though the smaller size of its imports may constrain its ability to do so.
“China isn’t likely to make concessions that the U.S. wants with a big stick hanging over its head,” said Zhou Xiaoming, a former Ministry of Commerce official and diplomat. “If the tariffs that Trump threatens are implemented on Friday, China has to respond.”
