Trump delays tariffs, waiting for next weekend meeting

President Donald Trump announced that the US would delay the increase of tariffs on Chinese goods as talks to end the trade war between the world’s two largest economies continue.

“I am pleased to report that the U.S. has made substantial progress in our trade talks with China on important structural issues including intellectual property protection, technology transfer, agriculture, services, currency, and many other issues,” Trump tweeted Sunday. “As a result of these very productive talks, I will be delaying the U.S. increase in tariffs now scheduled for March 1.”

The delay comes less than a week before the 90-day trade war truce agreed to by Trump and Chinese President Xi Jinping was set to expire. After the original March 1 deadline, US tariffs on $200 billion worth of Chinese goods were set to increase from 10% to 25%.

Many economists and business leaders warned that such an increase would be damaging for the US economy.

Trump tweeted that the two sides had made “substantial progress” on structural issues, including protection of intellectual property and an end to the forced transfer of U.S. technology. The president hopes to finalize a deal during a face-to-face meeting with Chinese President Xi Jinping at Trump’s Florida vacation home.

“Assuming both sides make additional progress, we will be planning a Summit for President Xi and myself, at Mar-a-Lago, to conclude an agreement,” Trump wrote, celebrating what he called “a very good weekend for U.S. & China!”

Trade talks were initially expected to wrap up Friday but had been extended through the weekend in a sign of positive momentum. Negotiators cautioned, however, that a final deal was still uncertain.

“It’s a little early for Champagne,” Commerce Secretary Wilbur Ross said Friday.

U.S. businesses will welcome the decision to delay higher tariffs. Even at the existing, 10 percent rate, Trump’s China duties are costing American businesses and consumers upwards of $2 billion per month.

The Trump administration launched the trade war in an effort to force China to reform their economic practices, including the theft of US intellectual property by Chinese firms and the ability of foreign companies to work in China. So far the Chinese have been unwilling to make significant concessions in these areas.

The extension of the tariff deadline shows that both sides have a strong will to reach an agreement. The focus is on how China is going to carry out its commitments, especially on government subsidies but there are also more granular issues. As long as both sides are willing to reach a deal, I think they eventually will overcome those obstacles and the probability of a final deal is good. A final deal will be reached after Xi and Trump meet, but on the enforcement of the deal, the two nations will still have some conflicts. This won’t be very smooth.