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US suspends tariffs on China, stoking fears of a loss of leverage

Steven Mnuchin Photo: AP

The Trump administration has suspended its plan to impose sweeping tariffs on China as it presses forward with trade talks, a gesture that will temporarily ease tensions between the two nations but rapidly increase pressure on President Trump to secure the type of tough deal that he has long said is necessary to protect American workers.

Steven Mnuchin, the Treasury secretary, said on Sunday that the two countries had made progress as they concluded three days of intense trade negotiations in Washington late last week. The planned tariffs on as much as $150 billion worth of Chinese goods are off the table while the talks proceed, he said.

“We’re putting the trade war on hold,” Mr. Mnuchin said on “Fox News Sunday.”

The reprieve came as many crucial details remained undecided, and trade experts warned that the suspension of tariffs could undercut Mr. Trump’s leverage and thrust the United States back into the kind of lengthy — and ultimately fruitless — negotiations with China that have bogged down previous administrations.

There are also large and lingering questions about what the United States planned to do with one of its most powerful bargaining chips: the Chinese telecom firm ZTE, which has been crippled by sanctions that prevent it from buying American components. Mr. Trump last week suggested on Twitter that he might rethink the company’s punishment in return for trade concessions.

Warnings from Mr. Trump’s national security team and lawmakers about easing up on ZTE — which has been accused of failing to punish employees who violated trade controls against Iran and North Korea — prompted American officials to take a tougher stance on the company in talks. That, in turn, provoked a less cooperative stance from the Chinese negotiators, who had arrived from Beijing believing that the Trump administration might be prepared to relent. The standoff over ZTE was a significant reason more progress was not made during the talks in Washington, according to three people familiar with the discussions.

On Sunday, Mr. Mnuchin said that the United States was not willing to revisit its penalties on ZTE, which gets a large amount of its semiconductors from Qualcomm, the San Diego-based chip maker. He said that there had been no “quid pro quo” linking a trade deal to ZTE’s fate, although President Xi Jinping of China had asked Mr. Trump to consider offering relief to the company.

Mr. Mnuchin insisted that the Trump administration was not “going easy” on China over ZTE or the trade talks. Mr. Trump wanted to be “very tough” on ZTE, and that the tariffs could be put back in place if the trade negotiations collapsed, said Mr. Mnuchin, whose department is also required to send recommendations for restrictions on Chinese investment to the White House this week.

“He could always decide to put the tariffs back on if China doesn’t go through with their commitments,” Mr. Mnuchin said.

Larry Kudlow, Mr. Trump’s top economic adviser, said on ABC’s “This Week” on Sunday that a path to ZTE’s revival exists, but that it would be arduous.

“If any of the remedies are altered, they are still going to be very, very tough, including big fines, compliance measures, new management, new boards,” Mr. Kudlow said. “The question is whether there are perhaps some small changes around the edges. I think President Trump is doing this because there’s some very good feeling between him and China.”

“Do not, please, do not expect ZTE to get off scot-free,” he added. “It ain’t going to happen.”

On Saturday, both countries released a joint statement that offered little detail about what had been agreed to, other than holding another round of discussions in China. Mr. Mnuchin said on Sunday that the countries had agreed on a “framework” under which China would increase its purchases of American goods, while putting in place “structural” changes to protect American technology and make it easier for American companies to compete in China.

And while Trump administration officials said last week that China was prepared to increase its purchases of American products by $200 billion by 2020, Chinese officials had pushed back on that claim, and the joint statement the two sides released lacked any such dollar figure.

On Sunday, Mr. Mnuchin declined to confirm that figure. “We have very specific targets; I’m not going to disclose what they are,” Mr. Mnuchin said. “They go industry by industry.”

He suggested that, under a deal, China would increase its purchases of American agricultural products by 35 percent to 45 percent this year and ramp up energy purchases over the next three to five years.

Mr. Kudlow said on Sunday that the $200 billion number was a “rough ballpark estimate” that both sides had used.

“They are offering to make structural reforms, such as lower tariffs and lowering nontariff barriers, which will permit us to export billions and billions more goods to China,” Mr. Kudlow said. “That’s the elementary point. That’s the key point.”

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