Americans give up ground in trade war

Top News | REUTERS 16 Apr 2019

American negotiators have tempered demands that China curb industrial subsidies as a condition for a trade deal after strong resistance from Beijing, which marks a retreat on a core US objective.

The two biggest economies are nine months into a trade war that has cost billions of US dollars, roiled financial markets globally and upended supply chains.

Donald Trump has slapped tariffs on Chinese imports worth US$250 billion (HK$1.95 trillion) to press demands for an end to policies - including subsidies - that Washington says hurt American companies competing with Chinese firms. Beijing responded with its own tariffs on US goods.

The issue of industrial subsidies is thorny as they are intertwined with Chinese policy. Beijing grants subsidies and tax breaks to state-owned firms and to sectors seen as strategic for long-term development.

In the push to secure a deal in the next month or so, US negotiators have become resigned to securing less than they would like on curbing the subsidies and are focused instead on areas in which they consider demands are more achievable, insiders said.

Those include ending forced technology transfers, improving intellectual property protection and widening access to China markets. Beijing has already given ground on those issues.

"If US negotiators define success as changing the way China's economy operates, that will never happen," said a source with knowledge of the talks.

"A deal that makes President Xi Jinping look weak is not a worthwhile deal for Xi."

But Beijing has taken steps to address some US concerns in cases taken before the World Trade Organization.

It has also begun to publicly play down its push to dominate the future of high-tech industries under its much-trumpeted "Made in China 2025" policy.

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