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U.S., China agree to abandon trade war

Posted May. 21, 2018 08:52,   

Updated May. 21, 2018 08:52


Beijing and Washington have agreed to substantially reduce America’s massive trade deficit with China and stop tit-for-tat trade war. Beijing pledged to purchase more American goods including agricultural products and strengthen cooperation on protecting intellectual property.

The United States and China issued a joint statement after delegations led by U.S. Treasury Secretary Steven Mnuchin and Chinese Vice-Premier Liu He had the second round of talks last week. The two sides agreed to reduce America’s trade deficit with china which hit 372.5 billion dollars last year and examine institutional measures to prevent China’s infringement on U.S. intellectual property rights.

"There was a consensus on taking effective measures to substantially reduce the United States trade deficit in goods with China," the joint statement said. "To this end, China will significantly increase purchases of U.S. goods and services." Agricultural products, which are mainly produced in areas of Trump’s strong support base, automotive and energy products, are included in the list of items for increasing U.S. exports. Semiconductors and aircrafts were not included, although they were discussed. The statement provided no dollar amounts on how much China would increase its purchase of American products. The United States reportedly offered to specify the amount of 200 billion dollars, but China is known to have refused to do so.

However, economists say the agreement would not practically help reduce America’s trade deficit, citing that the multi-billion-dollar trade imbalance stems from the different economic structure with the United States being the world’s largest consumer and China being the world’s factory on the strength of its cheap labor costs. There is skepticism about how much the imbalance will be reduced by merely increasing China’s purchase of American goods such as agricultural and energy products. According to The New York Times, there could be 5 billion-dollar increase in soybeans and 9 billion-dollar increase in liquefied natural gas, oil and coal. However, even if the advanced technological and defense industrial products are included, it would add up to only a small fraction of the 200 billion-dollar decrease total, and these are unrealistic numbers.

Jeong-Hun Park sunshade@donga.com · Wan-Jun Yun zeitung@donga.com