Tariff Pressure

So far, U.S. Trade Representative Robert Lighthizer and his team, which declined to comment, have been adamant that the duties on $250 billion in Chinese goods -- imposed early in the trade war -- be maintained over the long term as a way to enforce any commitments China makes.

The questions over the future of negotiations reflect a change in U.S. strategy. After ramping up tariffs and pressure on China over the summer and saying he would settle only for an all-encompassing agreement, Trump in early October shifted to the step-by-step approach.

The first phase, which negotiators are still trying to nail down, is expected to include a resumption of Chinese purchases of U.S. farm goods and other products such as aircraft.

It’s also expected to include Chinese commitments to protect American intellectual property and an agreement by both sides not to manipulate their currencies. In return, Trump agreed not to go ahead with an Oct. 15 tariff increase and aides have raised the possibility of canceling the Dec. 15 levies.

But missing from the deal now taking shape are many of the deeper economic reforms such as a changes to the regime of government subsidies Chinese companies benefit from that the Trump administration – and American businesses – have been seeking, raising questions over whether the economic cost of Trump’s trade assault will have been worth it.

Trump has sought to preempt criticism that he’s getting little from China by arguing that the tougher issues will be dealt with in future phases. “Phase two will start negotiations almost immediately after we’ve concluded phase one,” he told reporters this month.

Yet the move to a phased approach reflects China’s resistance to many U.S. demands and a concession by the White House to abandon its stance that nothing is agreed until all the thorny issues are resolved.

“Even if they do get a phase one, a phase two is going to be substantially more difficult because all the really difficult issues are being deferred,” said Eswar Prasad, who once led the International Monetary Fund’s China team and is now at Cornell University.

During recent conversations with senior Chinese policy makers, Prasad said the common theme they expressed was skepticism. “They are quite pessimistic,” he said. “They fear that any deal that they negotiate with Trump could blow up in their face.”