President’s comments send stocks skidding, but could be a bargaining tactic as deadline looms for tariffs on consumer goods
President Trump said that he was willing to wait until after next year’s presidential election to strike a limited trade deal with China, sending stock prices down sharply and casting doubt on whether the two sides will find enough common ground to head off new tariffs.
“In some ways, I think it’s better to wait until after the election, you want to know the truth,” Mr. Trump told reporters after meeting with NATO Secretary General Stoltenberg in London before U.S. markets opened on Tuesday. The Dow Jones Industrial Average fell 400 points in the first half-hour of trading, recovering slightly by midafternoon.
Mr. Trump said later that the decline was “peanuts” compared to how much the market has climbed during his presidency. “I don’t watch the stock market,” he said, though his top advisers have long said he often quizzes them on market fluctuations and reacts furiously if they lay blame for a decline on his trade policy.
Still, Mr. Trump’s remarks probably indicated an effort to gain leverage during the last two weeks before a Dec. 15 deadline for new tariffs on consumer goods to take effect, rather than signaling a fundamental breakdown in talks, said U.S. officials and close allies of Mr. Trump.
The American side points to the recent involvement of White House adviser Jared Kushner, the president’s son-in-law, as evidence that the talks are nearing conclusion. Mr. Kushner acts as a kind of interpreter of what Mr. Trump will find acceptable in a deal and has worked well with U.S. Trade Representative Robert Lighthizer, Mr. Trump’s lead negotiator, and Chinese Ambassador Cui Tianka.
“Ultimately, the president is rewarded in the ballot box by getting a deal done,” said Jason Miller, Mr. Trump’s former communications director. “He’s not rewarded in the ballot box by having a trade fight with China.” But Mr. Trump needs to make sure that the Chinese come through with a good offer before he approves a deal, Mr. Miller said.
Chinese officials have said the trade negotiations are still on track. Beijing has strong incentives to move ahead with the trade deal, which could help alleviate pressure on the country’s fast-weakening economy.
During the past two years, Mr. Trump has often amped up his rhetoric shortly before a tariff deadline, only to strike a deal that put the trade battle on hold. So far, however, those truces haven’t held.
The U.S. now has tariffs on about $360 billion of Chinese imports and is scheduled to add 15% tariffs on another $165 billion or so of imports on Dec. 15, unless the two sides strike a deal.
The tariffs could spark a consumer backlash, as they would hit Apple Inc.’s iPhones, laptop computers, toys and clothing. Mr. Trump’s top advisers, including Mr. Lighthizer, Treasury Secretary Steven Mnuchin and National Economic Council Director Larry Kudlow want to avoid these tariffs nearly as much as the Chinese.
But the Chinese want more from a deal than eliminating future tariffs; they want a tariff rollback. Mr. Trump and Mr. Lighthizer have been holding firm against eliminating tariffs, which has been a major sticking point in the negotiations.
The so-called phase-one deal now being negotiated would also include Chinese pledges to buy billions of dollars more in agricultural goods, liberalize somewhat China’s financial-services sector and strengthen its intellectual-property protection.
A deal would only cover a small portion of the U.S. complaints against China, leaving largely untouched fundamental issues including eliminating government subsidies for Chinese state-owned firms and ending coercion of U.S. companies to transfer technology to Chinese partners.
Those matters would be left to a phase two and three of the trade talks, amid widespread skepticism in the U.S. business community that future talks will bear fruit. Mr. Lighthizer wants to keep massive tariffs on China to make sure they do.
Meanwhile, Mr. Lighthizer has been focusing this week on clearing away issues related to the renegotiated North American Free Trade Agreement so he can count on Democratic support for it.
Officials in both Washington and Beijing have said recently that they have been making big progress in coming to an agreement, including compromising on language in the negotiating text that had vexed negotiators for months.
The two sides also have been planning a ceremony for the partial deal that wouldn’t include the two leaders. That eases the way to conclude an agreement—though it also means Mr. Trump wouldn’t get his long-sought signing ceremony with President Xi Jinping, which would be a political boon. Mr. Kudlow last month hinted at that. “Both leaders have said from time to time their top ministers could do it,” he said.
Mr. Xi sees no reason to travel to Washington, or any part of the U.S., at a time when anti-China voices are getting louder, say Chinese officials. Beijing is studying the signing of the U.S.-Japan trade deal in October as a model. The Japanese ambassador in Washington inked the agreement on behalf of Tokyo, as did Mr. Lighthizer. Mr. Trump was in attendance. China is also weighing whether to send Vice Premier Liu He, its lead trade negotiator, to Washington to sign the deal.
Another positive sign was Beijing’s muted reaction to Mr. Trump’s signing of a bill supporting Hong Kong’s anti-Beijing protesters. China immediately vowed to retaliate, but waited until Monday to hit back at Washington in a largely symbolic move: It suspended visits to Hong Kong by American warships and imposed unspecified sanctions on several U.S.-based nongovernmental groups.
“The Chinese understood Trump was facing a veto-proof majority,” said Brookings Institution China expert David Dollar, who was the Treasury Department’s China representative under President Obama. “They won’t let it derail negotiations.”
Still, negotiations could fall apart, as has happened many times before. China could look at Mr. Trump’s threats to raise tariffs on steel and aluminum from Argentina and Brazil, despite an import agreement, as suggesting that Washington can’t be trusted to keep its word.
Beijing could also go ahead with announced plans to publish a list of “unreliable entities”—foreign companies that Beijing views as problematic—which would face sanctions. Global Times, a government-backed newspaper said in a tweet early Tuesday that Beijing would go ahead with the effort soon, in response to a bill sponsored by Sen. Marco Rubio (R., Fla.) requiring sanctions against Chinese officials involved in the repression of Uighur Muslims in the far west region of Xinjiang.
FedEx Corp. could find itself on such a list, say China experts. The company has had recent run-ins with Beijing over packages that weren’t delivered to Huawei Technologies Co., the huge Chinese telecommunications firm that is being sanctioned by the U.S.
Should Beijing actually move ahead with those plans, it is bound to cause a furor in Washington, which would make signing a deal more politically difficult. Asked for comment, a FedEx spokesman referred to a July statement where the company said it was cooperating with Chinese authorities and was “committed to full compliance with all applicable laws and regulations.”
But Beijing has threatened to publish the list since May, when the U.S. government sanctioned Huawei, and hasn’t followed through for fear of further hurting Chinese companies’ ability to buy U.S. technology.