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China Responds to the Bilateral Meeting at the G-20 Summit


The Administration issued a statement on Monday December 3rd confirming the lack of specifics arising from the dinner meeting between the Presidents of China and the U.S. and their respective advisors on the preceding Saturday night. According to tweets and statements from the President it was his understanding that his gesture in holding tariffs on $200 billion of imports to the U.S. from China at 10 percent and not raising the rate to 25 percent on January 1st 2019 was matched by concessions from our trading partner characterized as a “great deal”.


It was stated that China would import an unspecified but “very substantial” quantity of energy, agricultural products and industrial equipment, limit distribution of fentanyl and would reduce the 40 percent tax on U.S. automobiles. The comments from the President noted that outstanding issues including theft of intellectual property, coercive joint-venture agreements and state subsidized dumping would have to be resolved in bilateral negotiations within 90 days.


In a report from China posted on Reuters on Wednesday December 5th it is apparent that China has the intention of placing any increase in tariffs in abeyance during negotiations but offered no specifics on imports or reducing the tariff on autos. The article cited an official at the Chinese Academy of Social Sciences as stating “China should prepare but not rush to make concessions” Yu Yongding added “This is a competition of endurance to see who breaks first”.


It appears that a decision to clamp down on manufacture and trading in fentanyl has been made. A second consideration, relating to the theft of intellectual property was the subject of a November 21st directive from the Development and Reform Commission of China specifying retribution for errant companies.


A more definitive statement of intentions including the actual start date of the 90-day period for negotiations has yet to be officially announced. The success of the dinner meeting in Argentina will only be apparent from the timing and quantity of orders for soybeans and machinery in addition to meaningful progress in resolving structural issues. Given past history, this may take a lot longer than anticipated by the White House as of Sunday morning.