U.S. agrees to halt additional tariffs on Chinese goods for now

By Bob Davis, William Mauldin and Lingling Wei
Updated June 29, 2019 11:37 am ET

OSAKA, Japan—President Trump and Chinese President Xi Jinping agreed to a cease-fire on trade that will remove some curbs on Huawei Technologies Co. buying high-tech equipment from the U.S., for the moment lifting one cloud over the global economy.

Under the cease-fire, the U.S. agreed to put off additional tariffs on Chinese goods indefinitely. In response, China will start buying large amounts of American farm products, Mr. Trump said.

Until the two leaders sat down for an 80-minute lunch meeting Saturday on the sidelines of a Group of 20 meeting, the U.S. was poised to hit China with tariffs on the roughly $300 billion in goods that aren’t currently covered by 25% tariffs. Afterward, Mr. Trump said the sides were ready to start talking again.

“We’re going to work with China on where we left off to see if we can make a deal,” he said at a news conference. “I’m not rushed,” he said, calling the talks “intricate.”

Mr. Trump said he was leaving the Huawei issue until the end of negotiations, but for now, the Chinese telecommunications giant looks to gain a significant reprieve. The president said American firms could ship goods to Huawei, which parts of the U.S. government have called a national-security risk.

He added that the U.S. would hold meetings shortly on how to deal with Huawei. The company is on a so-called entity list, which prevents suppliers from selling U.S.-origin technology to Huawei without government approval. The National Security Council has been examining ways of narrowing the restrictions on Huawei so they focus on sales of U.S. technology used in “chokepoints,” where Huawei technology could control wireless networks, people familiar with the discussions said.

Mr. Trump was clearly making Huawei a part of any trade settlement, although his top advisers, including Treasury Secretary Steven Mnuchin, have said the administration was keeping Huawei separate from trade talks.

“We’re talking about equipment where there’s not a great national-emergency problem with it,” Mr. Trump said.

The Wall Street Journal reported earlier this week that Beijing viewed a Huawei reprieve as a precondition for reaching a trade deal with Washington.

The abrupt turnaround is bound to open the president to criticism from Democrats and hawkish Republican lawmakers who see Huawei as a threat. Secretary of State Mike Pompeo, Federal Communications Commission Chairman Ajit Pai and others have described the company similarly.

“Huawei is one of few potent levers we have to make China play fair on trade. If President Trump backs off, as it appears he is doing, it will dramatically undercut our ability to change China’s unfair trades practices,” said Senate Minority Leader Chuck Schumer (D.-N.Y.) in a statement Saturday.

Sen. Marco Rubio (R.,Fla.) threatened legislation to keep the pressure on Huawei.

“If President Trump has in fact bargained away the recent restrictions on #Huawei, then we will have to get those restrictions put back in place through legislation,” Mr. Rubio said in a tweet. “And it will pass with a large veto proof majority.”

But business groups applauded the resumption of talks. They had maintained that the $300 billion in threatened new tariffs would hammer businesses and consumers.

“Pulling back from the brink of further tariff escalation is a good sign for retailers and their customers,” said David French, senior vice president of government relations for the National Retail Federation.

Jay Timmons, the chief executive of the National Association of Manufacturers, said “a trade deal, not a trade war, is exactly what manufacturers have advocated over the last year and a half, and today’s meeting brings us closer to that goal.”

Myron Brilliant, head of international affairs at the U.S. Chamber of Commerce, said that if China commits to leveling the playing field for U.S. companies, the Trump administration should withdraw existing tariffs on $200 billion in Chinese imports as part of an accord, instead of keeping levies in place to ensure compliance. He said the current tariffs “are harming U.S. manufacturers, farmers and consumers.”

Mr. Trump called Mr. Xi a “brilliant man” and one of the greatest Chinese leaders of the last 200 years. And Mr. Trump adopted a benign description of U.S.-China relations that echoed Mr. Xi, saying the countries are “strategic partners.”
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That is a different description from the one in the Trump administration’s National Security Strategy of December 2017, which labeled China a “strategic competitor” and a revisionist power.

Mr. Xi also laid out a positive vision of U.S.-China relations, saying the countries will “maintain exchanges at all levels” and work together for stability, according to the official Xinhua News Agency.

Despite political pressures against Huawei in Washington, Mr. Trump’s move to permit sales of U.S. technology to the Chinese company is likely to win favor in Silicon Valley. John Neuffer, president of the Semiconductor Industry Association, said the group was “encouraged the talks are restarting and additional tariffs are on hold.” He added that he needed more detail on what his members could now sell to Huawei.

A Chinese diplomat reiterated Beijing’s position that Huawei is a private company with competitive products. “If it can be done as promised, we welcome it,” said Wang Xiaolong, the special envoy for G-20 affairs at China’s Foreign Ministry, referring to Mr. Trump’s remarks on Huawei.

The easing of tensions was greeted warmly by other world leaders gathered in Osaka, who said the trade conflict was weighing on the global economy. “First and foremost I believe this is good news for everyone,” said French President Emmanuel Macron.

It also is a relief for American companies in China that worried they would become targets for retaliation by Beijing if the trade conflict heated up. The Chinese government heightened those anxieties by saying it would compile a blacklist of foreign businesses and individuals.

The cease-fire “breathes some much-needed certainty into a slowly deteriorating relationship,” said Jacob Parker, vice president at the U.S.-China Business Council in Beijing. “Now comes the hard work of finding consensus on the most difficult issues.”

Mr. Trump touted China’s willingness to buy large amounts of U.S. farm goods as a big benefit of the truce. He said China would begin immediate purchases of American goods and will be “spending money even during the negotiations.”

On Friday, before Messrs. Trump and Xi sat down for their discussions, China purchased 544,000 metric tons of soybeans, according to the U.S. Agriculture Department.

While Mr. Trump’s trade negotiators have said they are focusing on structural change in China—such as ending pressure on U.S. firms to transfer technology to their Chinese competitors—Mr. Trump has frequently stressed increased exports instead. The president counts on rural America as a bedrock of support and farmers have taken the brunt of retaliatory tariffs by China and other countries hit with U.S. levies.

The Trump administration has made billions of dollars in payments to compensate farmers for lost sales. At the press briefing, Mr. Trump called farmers “green patriots.”

In another nod to Chinese concerns, Mr. Trump said he welcomed Chinese students studying in the U.S. and hoped many would remain after their studies were over. He talked about what he called a “smart persons waiver,” which could help such students get permanent U.S. residency. Chinese students and scholars say it has become more difficult for them to get visas to study in the U.S.