March 1 Deadline for U.S.-China Deal Nears

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As the hours tick closer to the end of February, negotiators for the United States and China are attempting to solve in weeks trade and economic issues that have lasted for decades. Last week, U.S. Treasury Secretary Steve Mnuchin and Trade Representative Robert Lighthizer attended high-level trade talks in Beijing. According to the White House, the discussions focused on “structural issues, including forced technology transfer, intellectual property (IP) rights, cyber theft, agriculture, services, non-tariff barriers, and currency.” While there has been stated progress in some areas, the two sides appear to remain far apart on IP protection and technology transfer.

The seemingly constant negotiations are the result of the 90-day trade negotiation agreement, which ends March 1, approved by President Trump and President Xi after a meeting at the G20 on December 1. The agreement to negotiate halted further tariff action by both countries in the interim, including the planned increase of tariffs on $200 billion in Chinese imports, included in a third list of products targeted by tariffs that the Administration released last year, from 10% to 25% on January 1. While the tariffs remain at 10 percent, companies are not allowed to apply for product exemptions as they are with products on the first two lists of tariff-targeted products.

President Trump has long said that he will not agree to any deal until he meets with President Xi and that is not scheduled to take place before March 1, though some have suggested that a phone call could be sufficient for him. Prior to last week, President Trump and other Administration officials had been fairly adamant about refusing to consider extending the deadline, even if talks were going well. However, that rhetoric has begun to change with unnamed officials floating the possibility of a 60-day extension if progress continues to be made. We likely will not know if the tariff rates will increase or if the deadline will be postponed until immediately prior to Administrative action.

It is also important to note that any agreement and commitments will be contained in a Memoranda of Understanding, rather than a more formal agreement that could be subject to Congressional approval. There has been bipartisan support for the Administration’s attempt to address U.S.-Chinese trade issues, but some members have expressed concern about the end goal—and the ability of the Chinese to make systemic economic and political changes—in a matter of weeks, as well as the pressure continued tariffs are having on agriculture, small and medium sized businesses, and other constituent concerns.

Chinese officials are in Washington this week to continue talks.