President Donald Trump is closing in on a trade deal with China that appears likely to fall short of several of his goals, including a dramatic reduction in Chinese government industrial subsidies, according to a leading business group that closely tracks the negotiations.
Administration officials have been pressing China to dramatically pare the state’s economic role during talks aimed at a comprehensive trade deal. Financial subsidies and tax preferences for Chinese companies are among the main stumbling blocks as negotiations approach what officials say will be a make-or-break week.
Along with giving Chinese firms a competitive advantage, subsidies encourage excess production that drives down global prices for products such as steel and aluminum, according to U.S. officials. So far, China has indicated a willingness to reduce some of the central government’s aid for favored firms but is balking at curtailing generous subsidies provided by provincial organs.
“I’m not sure we’re going to get all the progress we want,” said Myron Brilliant, executive vice president of the U.S. Chamber of Commerce, who is in regular contact with negotiators. “We’re not likely to get the commitment we want on cutting back and eliminating subsidies.”
The president’s chief trade negotiator, Robert Lighthizer, arrived back in Washington on Thursday following almost two days of negotiations in Beijing. His office declined a request to comment on the talks.
Chinese Vice Premier Liu He is scheduled to arrive in Washington on Wednesday, leading a delegation of more than 100 officials, in hopes of wrapping up a deal.
The administration wants Beijing to stop forcing foreign companies to surrender their technology secrets to gain access to the Chinese market and to quit stealing trade secrets via computer hacking.
Chinese government support for cyberattacks on U.S. companies was one of the reasons Trump imposed tariffs on more than $250 billion worth of Chinese goods last year. But Brilliant told reporters that hacking now “might have to be addressed separate from these negotiations” because of its national security implications.
The administration also appears likely to disappoint the pharmaceutical industry by accepting a Chinese proposal to provide less protection to a class of drugs known as biologics. U.S. companies would get eight years of regulatory data protection for biologics in China, compared with 10 years in the new North American trade deal and 12 years under U.S. law.
Brilliant said Chamber officials recently raised the biologics issue with administration officials.
Indications of shrinking U.S. ambitions come weeks after the president saidthe two sides were headed for an “epic” and “monumental” trade deal.
When negotiations resume next week, the toughest bargaining probably will center on the deal’s enforcement mechanism and the fate of Trump’s tariffs. The president wants to maintain leverage by keeping some import levies in place, an idea the Chinese are resisting.
Beijing wants all of the U.S. tariffs removed before it will eliminate its retaliatory tariffs on American farm products and industrial goods, including automobiles.
Meanwhile, a report in China’s Global Times that the trade talks had reached “an impasse” spooked U.S. investors on Thursday. The Dow Jones industrial average fell more than 225 points before staging a partial rebound to close at 26,307.79, down 122.35 points, or less than 0.5 percent, for the day.
Though the hard-line Global Times is influential, it is not a reliable indicator of official views.
Treasury Secretary Steven Mnuchin described the talks as “productive,” and Brilliant said the Chinese delegation would not have agreed to visit Washington next week if the talks were stalled.
“The discussions remain focused toward making substantial progress on important structural issues and rebalancing the US-China trade relationship,” White House press secretary Sarah Sanders said in a statement.