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TWN
Info Service on WTO and Trade Issues (Jun25/11) Geneva, 12 Jun (D. Ravi Kanth) — After securing a trade truce between the world’s two largest economies in London on 10 June, United States President Donald Trump said that “OUR DEAL WITH CHINA IS DONE”, claiming that it is “SUBJECT TO FINAL APPROVAL WITH PRESIDENT XI AND ME.” However, the Chinese side seemingly presented a rather nuanced assessment, with the Chinese vice-premier and chief negotiator He Lifeng underscoring the need for the two countries to “resolve trade disputes” through “equal dialogue and mutually beneficial cooperation.” The contrast between the two respective pronouncements over the framework agreement reached at the historic Lancaster House seems somewhat puzzling. Both sides merely provided partial information on the details of the framework agreement while putting a gloss on the “tit-for-tat” export control measures instituted by them, said people familiar with the development. The framework agreement, on some level, seems more like a “work-in-progress”, as it does not fully remove the larger element of uncertainty, said people familiar with the development. At a White House briefing on 11 June, spokesperson Caroline Leavitt avoided giving a direct reply to questions concerning the removal of the export controls imposed by the Trump administration on advanced chips, jet engines, as well as the global ban on the use of Chinese telecom giant Huawei’s AI chips, among others. When asked about the status of the export controls that the US imposed on China, and whether they are no longer being imposed, the spokesperson merely said, “We are fully complying with the Geneva agreement.” According to the spokesperson, President Trump praised his trade team for their “fantastic job negotiating this on behalf of the United States and meeting their Chinese counterparts.” “The President is talking to them about the details of it now,” she said, insisting that “China has agreed to open their markets to the United States separately of this deal.” “And when it comes to this deal, we are going back to the terms that were agreed up in Geneva for the release of some of those critical minerals and the magnets from China to the United States,” the spokesperson said. Ahead of the White House briefing, President Trump took to his social media website Truth Social on 11 June, saying: “FULL MAGNETS, AND ANY NECESSARY RARE EARTHS, WILL BE SUPPLIED, UP FRONT, BY CHINA.” He continued: “LIKEWISE, WE WILL PROVIDE TO CHINA WHAT WAS AGREED TO, INCLUDING CHINESE STUDENTS USING OUR COLLEGES AND UNIVERSITIES (WHICH HAS ALWAYS BEEN GOOD WITH ME!).” President Trump added: “WE ARE GETTING A TOTAL OF 55% TARIFFS, CHINA IS GETTING 10%. RELATIONSHIP IS EXCELLENT! THANK YOU FOR YOUR ATTENTION TO THIS MATTER!” President Trump’s remarks that “we will provide to China what was agreed to” appear to be somewhat vague, as China has seemingly raised several issues such as supply of advanced chips, jet engines, and removal of third- country sanctions on the sale of Huawei’s AI chips, as well as the continuation of studies by Chinese students in American universities and colleges. It is not clear why President Trump did not provide any details on “what was agreed to” concerning China’s demands. Perhaps, for reasons of domestic censure by the China hawks in the US administration and outside, it may be possible that President Trump withheld the granular details of the framework agreement, said people familiar with the agreement. At the end of the second day’s meeting at Lancaster House on 10 June, the US Commerce Secretary Howard Lutnick said, “we have reached a framework to implement the Geneva Consensus and the call between the two presidents.” “So, that was on June 5th, when the two Presidents spoke to each other on the telephone,” Lutnick said. “So, we’ve combined those two. We’ve reached a framework for implementation.” Both sides seem to have combined the Geneva agreement reached on 12 May and the understanding reached between the two Presidents during their phone call on 5 June into a framework agreement that could still throw up occasional hiccups on grounds of suspicion and doubts, said people familiar with the statements made by the two sides. The deal, for example, appears to have preserved the understanding reached on tariffs in Geneva while adding several reciprocal arrangements on the supply of critical rare earth minerals by China on the one side, and a substantial departure by the US from its anti-China export control regime concerning the supply of high-end chips, jet engines, some chemicals, and the continued stay of Chinese students at American universities, on the other, said people familiar with the details of the agreement. President Trump claimed that the tariffs on Chinese goods entering the American market will remain at 55%, implying a total of 30% tariffs imposed during his second term on top of the pre-existing 25% imposed in his first term. “The two largest economies in the world have reached a handshake for a framework,” US Commerce Secretary Lutnick said. “We’re going to start to implement that framework upon the approval of President Trump, and the Chinese will get their President Xi’s approval, and that’s the process.” NUANCED UNDERSTANDING A commentary provided by China’s Xinhua news agency on 11 June suggests a more nuanced understanding of the framework agreement, with China’s Vice Premier He Lifeng urging Washington to “resolve trade disputes with China through equal dialogue and mutually beneficial cooperation.” However, the Chinese chief negotiator did not provide any concrete details on the framework agreement. He reiterated that the United States should work with China to honour their words with actions, and demonstrate sincerity in keeping commitments and concrete efforts to implement consensus, so as to jointly safeguard the hard-won outcomes of dialogue, Vice Premier He said, according to the Xinhua report. While the Chinese side was led by Vice-Premier He along with his commerce minister Wang Wentao and deputy trade minister Ambassador Li Chenggang, the US side was led by Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and US Trade Representative (USTR) Ambassador Jamieson Greer. During the talks, “the two sides held candid and in-depth talks, and thoroughly exchanged views on economic and trade issues of mutual concern,” said Ambassador Chenggang. According to the Xinhua report, “Calling the meeting an important consultation held under the guidance of the strategic consensus reached by the two heads of state on June 5, He said that China’s position on China-US economic and trade issues is clear and consistent.” “Noting that the essence of China-US economic and trade relations lies in mutual benefit and win-win cooperation, the vice premier said cooperation between China and the United States in the economic and trade field benefits both sides, while confrontation harms both,” Vice Premier He said, according to the Xinhua report. “There are no winners in trade wars,” He said, adding that “China does not seek conflict but will not be intimidated by one.” “Next, the two sides should, in accordance with the important consensus and requirements reached by the two heads of state during their phone call, make better use of the China-US economic and trade consultation mechanism, and work to enhance consensus, reduce misunderstanding and strengthen cooperation,” He said, according to the Xinhua report. Ambassador Li Chenggang agreed to Lutnick’s remarks, saying that the two sides “agreed in principle.” In principle, agreements on global trade could turn “upside down” due to unforeseen geopolitical and geoeconomic developments, and stand on a “weak leg” as regards certainty, said a person who asked not to be quoted. Given the urgency shown by the US administration to kick-start the supplies of critical rare earth minerals, including samarium, which is needed for magnets used in fighter aircraft, China appears to have found a route to keep the US under some checks, the person said. According to a report in the Wall Street Journal (WSJ) on 11 June, “The Chinese team, led by Vice Premier He Lifeng, a trusted aide to leader Xi Jinping, drove a hard bargain by asking the US side to loosen restrictions significantly on the sale of technology and other products to China.” With the negotiators from both sides remaining somewhat reticent to divulge the details of what they agreed to as part of the framework agreement, the chances of continued uncertainty over the trade truce remain rather high. “And the lack of announced details might suggest the US side will need Trump’s approval to undo some of the controls Beijing’s representatives asked for,” the WSJ reported. “Both sides would want deterrence to prevent the other side from violating the truce,” said an analyst, adding that there is “little political trust in each other.” Christopher Wood, global head of equity strategy at Jefferies in Hong Kong-China, said that the London meeting “looks like damage control, but it looks like they’ve got things back on track.” +
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