Buenos Aires | China has been given 90 days to agree to changes to its trade relationship with the US or be hit with another wave of tariffs, under a ceasefire negotiated between US President Donald Trump and his Chinese counterpart Xi Jinping.
During a two-and-a-half hour meeting at the conclusion of the G20 leaders’ summit in Buenos Aires on Sunday (AEDT), Mr Trump agreed to postpone plans to hit Beijing with billions more in tariffs on January 1.
In return, the White House said China would need to agree to several conditions to reduce the trade imbalance between the superpowers.
These include China agreeing to purchase “a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial, and other product from the United States”.
“China has agreed to start purchasing agricultural product from our farmers immediately,” the White House said.
The two nations also agreed to begin negotiations on structural changes to the trade relationship to iron out what the US says are unfair trade practices by Beijing.
These include forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft.
If there is no agreement within 90 days, Mr Trump will go ahead with his threat to increase from 10 per cent to 25 per cent existing tariffs on $US250 billion ($342 billion) of Chinese goods.
He has also threatened new tariffs of 10 per cent to 25 per cent on another $US267 billion in Chinese goods, but this was not referenced in the White House statement. Nor was there any reference to removing the existing 10 per cent tariffs.
The trade truce will buoy global financial markets this week which have been roiled by the prospect that the costly trade war between China and the US might spiral into a new and more damaging cold war.
“This was an amazing and productive meeting with unlimited possibilities for both the United States and China. It is my great honour to be working with President Xi,” Mr Trump said.
Allianz chief economic adviser and noted US economist Mohamed El-Erian was sceptical, saying it was “essentially a ceasefire re further escalation of trade tensions”.
News of the trade truce was first broken by China’s state television.
“No additional tariffs will be imposed after January 1, and negotiations between the two sides will continue,” China Global Television Network said.
At the start of the meeting, Mr Xi said: “Only with cooperation between us can we serve the interests of both peace and prosperity.”
The G20 was dominated by anxieties among world leaders and global markets should the talks have failed.
Prime Minister Scott Morrison was among those who urged a way through the impasse, warning the standoff was now posting a real threat to the global economy.
The meeting followed a consensus of sorts by the G20 leaders on trade when they issued their communique at the end of the two-day summit.
They agreed to reform the World Trade Organisation while dropping any reference to the need to fight protectionism in order to appease the US.
Mr Morrison defended this omission, saying the G20 communique also extolled the economic virtues of trade and everyone accepted protectionism was wrong.
Reforming the WTO so it could adjudicate trade disputes and promote free trade “is the post-ideological position on trade”.
“I don’t think anybody’s about protectionism.”
It is understood a reference to fighting protectionism, which was a key element of the G20 communique in 2017, was left out at the insistence of the US, which has been using tariffs as a weapon to force China to the negotiating table.
The communique from Buenos Aires also appeases the US over climate change with the insertion of a clause excusing the Trump Administration for withdrawing from the Paris climate change agreements. The other 19 G20 countries, including Australia, reaffirmed their commitments to Paris, but, officials said, only after Russia, Turkey and Saudi Arabia wavered.
The US later claimed support for the Paris agreements was “fraying”.
The communique took hours of exhaustive negotiation and was released just before Mr Trump and Mr Xi began their meeting.
Australia and the US hailed as a victory the agreement by all G20 nations that the WTO needed “reform” so its rules were more in tune with modern challenges, such as the digital economy. A reformed WTO could be used to sort out modern disputes such as that between China and the US.
“The system is currently falling short of its objectives and there is room for improvement. We therefore support the necessary reform of the WTO to improve its functioning,” the leaders said.
The communique stressed the economic importance of trade.
“International trade and investment are important engines of growth, productivity, innovation, job creation and development. We recognise the contribution that the multilateral trading system has made to that end,” it said.
Given China and the US could not agree on even such basic wording at the APEC summit in Papua New Guinea last month, Mr Morrison said the G20 communique was significant.
“International trade and investment has once again been affirmed here at the G20,” he said.
The US had been arguing for the inclusion of “free and fair trade” while China opposed the use of “fair”, one source said.
A US official told White House reporters the “headline story” from the G20 was trade reform.
“For the first time ever, the G20 recognised the WTO is currently falling short of meeting its objectives and that it’s in need of reform,” he said.
He said the other “big accomplishment for us” was the exemption from “the job-killing Paris agreement”.
“We think the best way to get energy security is a variety of sources of energy. We’re into renewables, solar, all that – but also clean coal and clean fossil technology. The G20 recognised that all types of energy play a role in energy security.
“What was interesting is that this was one of the last issues to close because the countries who typically might agree couldn’t agree with each other.
“What you’re starting to see is you’re seeing a little bit of the coalition fraying. Countries like Turkey, like Saudi Arabia, like Russia might be second-guessing some of that.”
Business Insider Emails & Alerts
Site highlights each day to your inbox.