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China signals US only needs to remove part of the tariffs for a trade deal

Krystal Hu

The year-long U.S.-China trade dispute is getting close to an initial deal. Ahead of a much-anticipated signing, China is trying to set the right expectations.

A revised editorial from an online blog owned by state media on Tuesday shows China is carefully communicating its softening stance to its people. Taoran Notes, a WeChat account affiliated with state-run Economic Daily, which is known for its insider knowledge about Beijing’s thinking in the trade negotiations, published an editorial with the headline “Reaching a trade deal must remove additional tariffs simultaneously” in Chinese on Tuesday night.

Within an hour, the commentary was removed, and it was republished with a new headline, “Reaching a trade deal must remove additional tariffs at equal ratio”, asking tariffs to be partly removed depending on how many issues are agreed upon in the initial deal.

This came hours after another published editorial, which states “removing all the additional tariffs is China’s most core concern.” The headline change suggests the Chinese do not expect all tariffs to be removed at once, sending positive signals that a deal will likely be reached.

It also reflects a shift in attitude, as negotiators in Beijing had repeatedly stated the removal of all tariffs as a prerequisite of any trade deal.

“China’s position, principle and goal for the China-U.S. trade negotiations has never changed,” Gao Feng, Ministry of Commerce spokesman said in October. “Both sides’ ultimate goal for the negotiations is to end the trade war, removing all additional tariffs.”

U.S. President Donald Trump meets with China's President Xi Jinping at the start of their bilateral meeting at the G20 leaders summit in Osaka, Japan, June 29, 2019. REUTERS/Kevin Lamarque

‘Politics is the art of compromise’

Many readers on WeChat pointed out the change. “Politics is the art of compromise. Looks like we’re getting closer to the actual signing,” one user wrote.

The two sides seem to be likely to settle on what President Trump has dubbed a “phase one” trade deal, which mainly includes the Chinese purchase of U.S. agricultural goods and rules on IP protection and currency manipulation. Trump and Chinese President Xi Jinping are expected to sign the agreement later this month, according to U.S. officials.

The Financial Times reported on Tuesday that the U.S. is considering removing a 15% additional tariff rate on $112 billion of Chinese imports introduced in September. The Wall Street Journal also reported similar news on Monday, that both China and the U.S. are considering rolling back part of levied tariffs.

“We believe that tariffs on imports from China have likely peaked,” wrote Alec Phillips, chief U.S. political economist at Goldman Sachs in a note on Monday.

The trade talk optimism has fueled the stock market, sending S&P 500 to a record high on Monday.

Krystal Hu covers tech and China for Yahoo Finance. Follow her on Twitter.

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