China denies it offered package to slash US trade gap by US$200b

Containers are seen at the Yangshan Deep Water Port in Shanghai April 24, 2018. ― Reuters pic
Containers are seen at the Yangshan Deep Water Port in Shanghai April 24, 2018. ― Reuters pic

BEIJING, May 18 ― China denied today that it had offered a package to slash the US trade deficit by up to US$200 billion (RM794 billion), hours after it dropped an anti-dumping probe into US sorghum imports in a conciliatory gesture as top officials meet in Washington.

US officials had said in Washington yesterday that China was proposing trade concessions and increased purchases of American goods aimed at cutting the US trade deficit with China by up to US$200 billion a year.

“This rumour is not true. This I can confirm to you,” Chinese foreign ministry spokesman Lu Kang told a regular news briefing.

“As I understand, the relevant consultations are ongoing and they are constructive,” he said, adding that he could not elaborate on the specifics of the negotiations.

Chinese Vice Premier Liu He is in Washington this week for talks with US officials led by US Treasury Secretary Steven Mnuchin aimed at heading off a trade war between the world's two biggest economies.

Earlier today, China announced that it was ending its sorghum investigation, which had effectively halted a trade worth roughly US$1.1 billion last year.

“The imposition of anti-dumping and anti-subsidy measures on imports of sorghum originating from the United States would have a widespread impact on consumer living costs, and does not accord with the public interest,” the Commerce Ministry said in a statement.

Big target

Getting to a US$200 billion reduction of the US-China trade deficit on a sustainable basis would require a massive change in the composition of trade between them, and the news had been met with scepticism from economists.

The US goods deficit was US$375 billion last year.

One US source said earlier US aircraft maker Boeing Co would be a major beneficiary of the Chinese offer to narrow the trade gap if Trump were to accept it. Boeing is the largest US exporter and already sells about a quarter of its commercial aircraft to Chinese customers.

Another person familiar with the talks said the package may include some elimination of Chinese tariffs already in place on about US$4 billion worth of US farm products including fruit, nuts, pork, wine and sorghum.

A White House statement described the meetings as part of “ongoing trade discussions” and said Trump met the Chinese delegation led by Liu and the US team led by Mnuchin.

“The United States officials conveyed the president's clear goal for a fair trading relationship with China,” the White House said.

That top-line number in the Chinese offer would largely match a request presented to Chinese officials by Trump administration officials in Beijing two weeks ago.

The two biggest US exports to China were aircraft at US$16 billion last year, and soybeans, at US$12 billion.

Sorghum surprise

The United States shipped 4.76 million tonnes of sorghum to China in 2017, worth about US$1.1 billion, accounting for the bulk of Chinese imports of the grain used in animal feed and Chinese liquor.

In April, China forced US sorghum exporters to put up a 178.6 per cent deposit on the value of sorghum shipments to the country after launching an investigation in February following Trump's imposition of steep tariffs on imports of solar panels and washing machines.

“China has taught a lesson to the United States and showed how it can hurt US exports,” said Ole Houe, director of advisory services at brokerage IKON Commodities in Sydney.

“Now they are showing goodwill by halting its anti-dumping investigation into sorghum imports, but it is a cheap way of showing goodwill as the US doesn't have much sorghum left to export. The next US sorghum crop will be harvested in August,” Houe said. ― Reuters