Beijing officials offer to step up purchases, but refuse to commit to Trump administration’s specific $200 billion cut from bilateral deficit

White House chief economic adviser Larry Kudlow, speaking at the White House on May 18, said China offered to boost its annual purchases of U.S. products by ‘at least $200 billion.’
White House chief economic adviser Larry Kudlow, speaking at the White House on May 18, said China offered to boost its annual purchases of U.S. products by ‘at least $200 billion.’ PHOTO: CAROLYN KASTER/ASSOCIATED PRESS

A last-ditch effort by the Trump administration failed to get China to accept its demand for a $200 billion cut in the U.S. bilateral trade deficit, as Chinese officials resisted committing to any specific targets after two days of contentious negotiations.

The two days of deliberations in Washington ended with both sides arguing all night on Friday over what to say in a joint statement, people briefed on the matter said. The Chinese had come willing to step up purchases of U.S. merchandise as a measure to narrow China’s $375 billion trade advantage. But U.S. negotiators pushed the Chinese delegates to approve a specific target of $200 billion in additional Chinese purchases. The Chinese refused any such target in specific dollar amounts, and the matter is now in the hands of President Donald Trump and President Xi Jinping, the people said.

The two sides released a joint statement shortly after the Chinese delegation was scheduled to return home, but it made no reference to the specific purchasing amounts that the U.S. had wanted.

“Both sides agreed on meaningful increases in United States agriculture and energy exports,” the statement said, adding that “the delegations also discussed expanding trade in manufactured goods and services. There was consensus on the need to create favorable conditions to increase trade in these areas.”

Chinese officials were wary of appearing to make concessions to Washington, and insisted the statement note that any Chinese purchases of U.S. goods and services are intended to “meet the growing consumption needs of the Chinese people.”

China on May 18 said it is dropping antidumping and antisubsidy investigations into imported U.S. sorghum.
China on May 18 said it is dropping antidumping and antisubsidy investigations into imported U.S. sorghum. PHOTO: SUE OGROCKI/ASSOCIATED PRESS

Beijing negotiators had come to Washington to settle a feud resulting from the Trump administration’s impatience with China’s large trade advantage. The U.S. side is also frustrated over allegations China pressures U.S. firms to transfer advanced technology and steals U.S. intellectual property. Washington has demanded China address these issues, under threat of U.S. tariffs on as much as $150 billion in Chinese goods. Should the U.S. make good on those threats, Beijing has promised to respond with its own tariffs on U.S. imports.

The procedural steps toward implementing the first tranche of threatened U.S. tariffs on $50 billion in Chinese imports could be completed by as early as next week, but in the joint statement, the two sides agreed to continue talking.

Souring the mood among Chinese officials were some U.S. media reports that China had accepted a U.S. request that Beijing slash its vast merchandise trade surplus by $200 billion, an amount that would cut by more than half the U.S. trade deficit with China. The Chinese side saw those reports as a last-minute effort by Trump administration officials to pressure Beijing into a public agreement that would meet U.S. objectives.

Early Friday, Larry Kudlow, director of the National Economic Council, had told reporters that China offered to boost its annual purchases of U.S. products by “at least $200 billion.” Mr. Kudlow also said “they are meeting many of our demands. There is no deal yet, to be sure.”

While Beijing has been wary of committing to numerical targets of specific purchase amounts, it has in general offered to buy more U.S.-made autos, energy and agricultural products as a way to ease the trade tensions between the two nations that have rattled global financial and commodities markets.

The Chinese delegation was headed by Vice Premier Liu He, who impressed Washington officials, Mr. Kudlow said in a Friday interview with White House reporters, adding Mr. Liu is a “smart guy, a market guy.”

One of Washington’s central demands is that China reduce its merchandise trade surplus by at least $200 billion by the end of 2020, even though economists in both nations say the trade deficit is affected by investment and savings patterns in both nations—not trade policy. Beijing has rejected most U.S. demands in the past and has continued to hold firm.

The U.S. Agriculture Department recently asked agriculture companies to come up with a list of products whose production could be ramped up rapidly for export to China, a person following the talks said. At the same time, China put together a list of high-tech products that are barred by U.S. export controls for sale to China but are allowed by other nations.

Beijing argues that if the U.S. would ease the export controls on these items, it would purchase more from the U.S., the person briefed on the matters said. Even so, some U.S. officials believe, the additional Chinese purchases would only total $50 billion to $60 billion in the next year or two, far short of the U.S. goal.

One Chinese request is for a reprieve on China’s ZTE Corp. from crippling U.S. sanctionsover its trade with Iran and North Korea. Mr. Trump said early last week that he would work with Mr. Xi to get the telecommunications-equipment maker “back into business,” defending such a move as part of a trade deal the U.S. is negotiating with China.

However, “there is no firm agreement on ZTE as of yet,” a person familiar with the discussions said. U.S. lawmakers from both parties have criticized any effort to ease restrictions on the company, calling ZTE a security threat, with Sen. Marco Rubio (R., Fla.) tweeting on Saturday: “If we don’t wake up & start treating this as a national security issue, China is going to win again.”

Settling the trade fight is taking on a degree of urgency as the tensions start hurting businesses in both countries. U.S. goods, including sorghum, soybeans and cars, have faced growing hurdles when entering China, while a U.S. order banning American companies from selling components to ZTE not only threatens the survival of the company but also that of other state-owned Chinese companies.

Responding to Mr. Trump’s promise of a reprieve for ZTE, Beijing has made a number of conciliatory gestures. China’s antitrust regulators had delayed for months U.S. private-equity firm Bain Capital’s $18 billion deal for Toshiba Corp.’s memory-chip unit, but on Thursday, the Japanese firm said regulators had allowed the deal to proceed. Chinese regulators also promised this week to restart their review of U.S. chip maker Qualcomm Inc.’s bid for NXP Semiconductors NV.

China has also offered to hold back penalties on a variety of U.S. agricultural products it announced in early April as retaliation for U.S. tariffs on Chinese steel and aluminum exports. China is a top buyer of U.S. farm products. On Friday, China’s Commerce Ministry announced an end of its antidumping investigation into imported U.S. sorghum.

Write to Bob Davis at bob.davis@wsj.com and Lingling Wei at lingling.wei@wsj.com

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