Top US, Chinese trade negotiators to face off at White House

Tariffs set to increase on March 1

Copyright 2018 CNN

(CNN) - President Donald Trump's top negotiators will press hard in this week's talks with their Chinese counterparts to close gaps on issues spanning everything from currency manipulation to halting Beijing's practice of forcing American companies to give up their technology in exchange for market access.

The big question is whether Trump will forgo escalating trade tensions ahead of a self-imposed 90-day clock that is set to expire March 2 at 12:01 a.m. -- or make good on his threat to ratchet up tariffs from 10% to 25% on $250 billion worth of Chinese goods.

Trump set out the accelerated timetable for negotiations after his meeting with Chinese President Xi Jinping in December amid a pause in trade hostilities, but since then the China issue has been overshadowed by other concerns, including Trump's meeting next week with North Korean dictator Kim Jong Un in Hanoi, Vietnam.

This week the two sides are expected to try to hammer out a memorandum of understanding, according to the White House -- an endeavor the Chinese have not addressed in public remarks.

Ahead of the latest round of crucial trade talks, which are set to continue with principal-level meetings Thursday in Washington, Trump sent his strongest signal yet that the March 1 deadline was "not a magical date," potentially offering negotiators additional breathing room to scrape a deal together.

"I can't tell you exactly about timing, but the date is not a magical date," Trump told reporters on Tuesday as Chinese negotiators arrived in Washington. "A lot of things can happen."

The Trump administration issued a notice officially logging the new tariff deadline into law shortly after the President's dinner with Xi in Argentina in early December. But that time stamp could just as easily be revised at Trump's discretion.

"March 1 was always an arbitrary deadline," said Craig Allen, president of the US-China Business Council. "This is what the President is apparently contemplating."

US Trade Representative Robert Lighthizer, Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, White House economic adviser Larry Kudlow and trade adviser Peter Navarro will all be part of this week's discussions with Chinese Vice Premier Liu He and his team.

Trump, a self-proclaimed "tariff man," has strategically used the imposition of such economic penalties as leverage over China. He has repeatedly credited his trade policy as the driving reason for the economic pain endured by the world's second-largest economy.

"The real question will be: Will we raise the tariffs?" Trump said Tuesday. "I know that China would like not for that to happen. So I think they are trying to move fast so that doesn't happen. But we'll see what happens."

The sharper comments by the President, however, could be viewed as an even greater willingness by the United States to consider holding off ratcheting up pressure on China at the end of this month. It also runs the risk of removing any urgency his top trade negotiators may need to bring Beijing to the table on remaining tougher issues.

Lighthizer has said March 1 is a hard deadline to escalate tariffs -- if there is no deal on the table.

"The deadline is March 1. That is the deadline," he said in late January, ruling out any consideration of an extension. A spokesperson for the Office of the US Trade Representative could not be immediately reached for comment by CNN.

On Wednesday, Rep. Richard Neal, a Massachusetts Democrat who's the chairman of the House Ways and Means Committee, asked Lighthizer to testify next week on the state of the negotiations, days ahead of the Trump administration's deadline.

This week's talks center on some of the tougher demands by the United States, including intellectual property rights, cybertheft and currency.

Those issues are rife with complications that will require significant changes in Chinese laws and regulations, along with careful examination of exact changes to any Chinese legislation, according to US-Sino trade experts.

"Every word is important," said Allen. "Thus, this type of 'course correction' is a very large undertaking, and the negotiators should be given whatever time is necessary to address the issues in detail."

Another big hurdle for the US side is brokering agreements with the Chinese on what enforcement mechanisms will be applied to the deal, including the reimposition of tariffs. Top US officials, led by Lighthizer, have repeatedly pressed for that to be an essential part of any agreement.

"Assuming one is forthcoming, it is difficult to anticipate how comprehensive any trade deal with China might be, or how business and investors will react to it," said David Joy, Ameriprise chief market strategist, in a note to clients. "But for now, both sides are saying that progress is being made, and that has led to a rise in sentiment."

That hasn't stopped Trump from touting the headway that negotiators made in talks last week in Beijing.

"Big progress being made on soooo many different fronts!" Trump tweeted Sunday, after meeting with his trade team at his Mar-a-Lago resort in Florida.

CORRECTION: This story has been updated to accurately reflect the deadline threatened by Trump to impose new tariffs on Chinese goods.

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