US-China trade war ‘on hold’ as America backs off on tariffs

Treasury secretary says America holding off on economic penalties as trade talks with China progress

American Treasury secretary Steve Mnuchin said US and Chinese officials had agreed on a framework that includes China increases their purchases of US goods (Reuters)

The US will hold off on imposing steep tariffs on China that ignited fears of a trade war as both sides pursue a broader deal, a top economic official said.

“We’re putting the trade war on hold,” Treasury secretary Steve Mnuchin said during an appearance on Fox News Sunday. “We have agreed to put the tariffs on hold”.

The announcement of a detente in the escalating trade dispute came after Chinese officials visited Washington last week, leading the White House to release an optimistic statement about both sides agreeing to take “measures to substantially reduce the United States trade deficit in goods with China” and to work on expanding trade and protecting intellectual property.

Donald Trump has railed against trade imbalances, particularly with China, as he seeks to renegotiate America’s economic relationship with other nations he accuses of exploiting the US.

Breaking with some of his top economic advisers, Mr Trump announced earlier this year that he would levy tariffs on steel and aluminium. He also signed a memorandum seeking tariffs on $60bn worth of Chinese goods.

China responded with retaliatory tariffs on food imports from the US. While the nascent standoff between the world’s dominant economies rattled markets and vexed many economists, Mr Trump evinced little worry about the consequences.

“Trade wars are good, and easy to win”, Mr Trump tweeted earlier this year.

But Mr Mnuchin signalled that America was using the leverage from tariff threats to pivot to negotiation, saying talks with Chinese officials had produced “very meaningful progress” - including a “Very productive” oval office meeting between Mr Trump and a top Chinese official.

As the administration continues to focus on slimming America’s trade deficit with China, Mr Mnuchin said, officials will press for “very hard commitments” in increased agricultural and energy exports to China.