U.S., China trade officials press ahead with ‘Phase 1’ deal as Trump mulls termination

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WASHINGTON/BEIJING (Reuters) – Top U.S. and Chinese trade representatives played down deep differences over the economic wreckage of the coronavirus pandemic and said they would press ahead with implementing their “Phase 1” trade deal after an overnight phone call.

FILE PHOTO: China’s Vice Premier Liu He gestures to the media between U.S. Trade Representative Robert Lighthizer (L) and Treasury Secretary Steve Mnuchin before the two countries’ trade negotiations in Washington, U.S., October 10, 2019. REUTERS/Yuri Gripas

U.S. President Donald Trump, critical of China’s early handling of the coronavirus outbreak in the city of Wuhan in late 2019, told Fox News Channel on Friday that he was “very torn” about whether to end the trade deal.

U.S. Trade Representative Robert Lighthizer discussed the deal with Chinese Vice Premier Liu He and U.S. Treasury Secretary Steven Mnuchin on the phone call. The U.S. officials said in a joint statement that both sides agreed the obligations would be met.

China’s Commerce Ministry said the two sides agreed to improve the atmosphere for implementation of the trade deal, which calls for Beijing to boost its purchases of American farm and manufactured goods, energy and services by $200 billion over two years compared to a 2017 baseline.

While China has made some purchases, some observers say these are running far behind the pace needed to meet the first-year goal of a $77 billion increase as China’s economy is just now beginning to recover from shutdowns imposed during the pandemic.

On the call, the two sides “agreed that in spite of the current global health emergency, both countries fully expect to meet their obligations under the agreement in a timely manner,” Lighthizer and Mnuchin said in their statement.

FEELING DIFFERENTLY

Trump and other top officials have blamed China for the deaths of hundreds of thousands from the outbreak and have threatened punitive action, including possible tariffs and shifting supply chains away from China.

Trump has said he would terminate the trade deal if China fails to meet its purchase commitments. He said on Wednesday that he would know within a week or two whether that was possible.

The U.S. statement suggested that more time may be needed and that the two sides would continue calls on a “regular basis.”

Calling into Fox News Channel just before the Labor Department announced that 20.5 million non-farm jobs were lost during April amid coronavirus business closures, Trump said the overnight phone call indicated that the deal “moves along.”

But he said that while he was initially “very excited” about the trade deal, the pandemic had changed his views about it.

“Look, I feel differently than I did. I was the most – I was very tough with China. They have to buy $250 billion worth of product, et cetera, et cetera,” Trump said.

Asked if he was “breaking up” the Phase 1 trade deal, Trump said: “I’m very – I’m very torn as to – I have not decided yet, if you want to know the truth.”

The U.S.-China Business Council, which represents U.S. companies doing business in China, said it was too soon to assess China’s compliance with the trade deal, given that it only took effect on Feb. 15 as a global health crisis was unfolding.

“It would be extremely destabilizing if the president pulled out of the agreement without giving the Chinese a chance to meet their commitments,” USCBC president Craig Allen said in a statement. “So far, China seems to be operating in good faith and has sought no modifications to its purchase commitments despite its ability to request them.”

A clause in the agreement allows for either party to seek consultations in the event a natural disaster or other unforeseen circumstances prevent compliance. The clause has not been invoked.

Reporting by Roxanne Liu, Huizhong Wu and Lusha Zhang in Beijing, Kanishka Singh in Bengaluru ; writing by Se Young Lee; Editing by Murali Anantharaman and Grant McCool

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