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Wednesday, May 23, 2018

China yields to USA on commercial deficit

Por MRod

The United States and China have taken a break in their commercial pulse. With their eyes on the negotiations for the denuclearization of North Korea, both giants have decided to reduce tension on the tariff front and, after two days of intense meetings in Washington, have released a joint statement in which Beijing agrees to take measures to reduce the US trade deficit, estimated at 375,000 million dollars in 2017.

"To meet the growing consumption needs of the Chinese people and their need for high-quality economic development, China will increase its purchases of American goods and services. This will help growth and employment in the United States. Both parties agreed to substantial increases in US agricultural and energy exports," the note said. The truce does not imply that the conflict has been settled. Despite the good intentions, figures have not yet been agreed and the request of the director of the National Economic Council, Larry Kudlow, that China increase imports from the US by 200,000 million has not been accepted either.

More than an armistice, what has been agreed in Washington are the conditions for an agreement. The dialogue continues and now a team of Trump will travel to Beijing "to work on the details". "Both parties agreed to seek resolution of the commercial and economic differences in a proactive manner," the statement said. We all know how this situation began. On March 23, the president ordered to impose tariffs on the Asian giant of 25% on imports worth 60,000 million dollars. The argument of the White House to start the trade war is well known. Trump believes that China has taken advantage of the US trade opening while closing the door to its products.

Let’s put it in figures so you can all understand Trump’s reasoning: while China allocates 18% of its exports to the US (505,000 million), the Asian giant only represents 8.4% of North American foreign sales (130,000 million). The result is a US deficit of 375,000 million. "The greatest in history," as Trump has repeatedly pointed out. The head of the Chinese delegation displaced to Washington for the negotiations, Liu He, made it clear to the state media of his country that, although the trade differences with the United States are deep, it has been possible to avoid a greater commercial conflict in the short term.

"Both parties are not going to wage a trade war and will stop raising the respective tariffs," he told Xinhua news agency. Liu said China will "contribute to the United States' efforts to reduce its trade deficit," without detailing any concrete figures that may have come out of the negotiations. The high-ranking official stressed, however, that "it takes time" to resolve the structural problems of the relations between both countries in economic and commercial matters.