WASHINGTON/BEIJING: Averting a trade war, China and the US on Sunday struck a deal under which Beijing will "significantly increase" its purchases of American goods and services to reduce the whopping USD 375 billion trade deficit with Washington.
After lengthy second round of talks in Washington, the two sides issued a joint statement early on Sunday vowing not to launch a trade war against each other.
"We're putting the trade war on hold. Right now, we have agreed to put the tariffs on hold while we try to execute the framework," US Treasury Secretary Steven Mnuchin said.
"That is we are going to reduce the trade deficit. We have an agreement with China that they will substantially agree to it," he said.
"There was a consensus on taking effective measures to substantially reduce the US trade deficit in goods with China," the joint statement said.
"To meet the growing consumption needs of the Chinese people and the need for high-quality economic development, China will significantly increase purchases of United States goods and services," it added.
This will help support growth and employment in the US.
Mnuchin said the US and China had agreed to back off from imposing tariffs on each other.
"We have made very meaningful progress and we agreed on a framework," Mnuchin told Fox News Sunday. "So right now we have agreed to put the tariffs on hold while we try to execute the framework."
President Donald Trump has threatened punitive measures against Chinese goods if Beijing does not cut down the trade deficit by USD 100 billion in a month and USD 200 billion by 2020.
The US says it has a USD 375 billion trade deficit in the USD 636 billion worth of total trade last year. China says the trade deficit is around USD 200 billion.
China too threatened a tit-for-tat retaliation but blinked in the end with a categorical undertaking to import more goods from US.
The two sides agreed on meaningful increases in US agriculture and energy exports. The US will send a team to China to work out the details, said the joint statement at the conclusion of the trade delegation level talks.
The US delegation included Mnuchin, Secretary of Commerce Wilbur L Ross, and US Trade Representative Robert E Lighthizer. The Chinese delegation was led by Vice Premier Liu He, the Special Envoy of President Xi Jinping.
The two sides also discussed expanding trade in manufactured goods and services with a consensus on the need for favourable conditions to increase trade in these areas.
The two nations attach great importance to the protection of intellectual property rights and agreed to strengthen cooperation. China will advance relevant amendments to its laws and regulations in this area, including the patent law, the joint statement said.
The two trade delegations also agreed to encourage two-way investment and to strive to create a fair, level playing field for competition.
"Both sides agreed to continue to engage at high levels on these issues and to seek to resolve their economic and trade concerns in a proactive manner," the statement said.
Liu told state-run China Daily that the trade talks are "quite successful, very meaningful and very fruitful".
Asked about what will be followed up in the coming months, Liu said that the two sides will see where "we have reached the consensus", and that they have already established some working groups, including the agricultural group, for consultations on concrete areas.
"Maybe some US government ministers will lead the groups to Beijing and will meet our colleagues to have deeper discussions with us and try to make concrete deals," he said.
The agreement came after reports that China has agreed to cut the deficit by USD 200 billion. A draft framework of US demands include that China cut the trade deficit by at least USD 200 billion by the end of 2020.
Washington also demanded Beijing halt subsidies for industries under the 'Made in China 2025' plan, and that China should not resort to retaliatory measures against the US.
The trade spat between the top two economies of the world began last month with Trump imposing tariffs on steel and aluminum imports into the US.
China retaliated by imposing additional tariffs worth USD three billion on 128 US products. Trump, while demanding China reduce the USD 375 billion by USD 100 billion, responded with USD 50 billion tariffs on Chinese products.
In further retaliation, China announced plans to impose new tariffs of 25 per cent worth USD 50 billion on 106 American products including items like soybean which could hurt US farmers. The two countries have not yet implemented the tariff hikes.
Meanwhile, the opposition Democratic party criticised the Trump administration for having failed to make much progress in trade disputes with China.
"We also discussed very important structural issues that they are going to make in their economy to make sure that we have a fair ability to compete there, and also protections about technology, which have been very important to the president," Mnuchin said.
When asked if the president's threat of USD 50 billion in tariffs on Chinese goods and USD 150 billion are all on hold, he said, "Yes they are. And the president had a very productive meeting with the vice premier in the Oval Office, with all of us and the vice president. He heard these commitments himself and he can always decide to put the tariffs back on if China doesn't go through with their commitments," Mnuchin said.