Tensions between Trump administration moderates and hardliners on trade with China are boiling over ahead of talks with Chinese negotiators in Washington this week — and as President Donald Trump seems increasingly eager to reach a deal.
Peter Navarro, a Beijing critic and the standard-bearer of the president’s harsh campaign rhetoric on China, had a screaming match with Treasury Secretary Steven Mnuchin, a moderate, during an initial round of talks in Beijing two weeks ago. On Wednesday, he wasn’t named on a Treasury Department list of U.S. officials who will meet with Chinese Vice Premier Liu He and the rest of the Beijing delegation at Treasury on Thursday and Friday.
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One administration official said Navarro was being excluded from the talks this week. A White House spokeswoman later said Navarro would have a role. It was not clear exactly what that would entail.
The controversy comes as Trump appears increasingly open to smoothing over differences with China in an attempt to avert a trade war before the midterm elections. He has turned to Mnuchin, a moderate who will lead the talks this week, to iron out differences on trade balances and technology theft.
Trump’s apparent openness to a deal has set off a panic among some of his more hard-line advisers, who blame Mnuchin for convincing the president to abandon his commitment to taking an aggressive posture toward China.
The blow-up in Beijing, first reported by Axios, happened when Navarro confronted Mnuchin because he seemed to believe that he’d been excluded from certain meetings with Chinese officials, according to one source briefed on the trip. But the Treasury Secretary was just following protocol in meeting one-on-one with his Chinese counterpart as the head of the delegation, according to a senior administration official.
Navarro and Mnuchin ended up screaming and cursing at one another on the lawn in front of the Chinese building where the talks were held – though no Chinese officials were present. Navarro also worried that Mnuchin was leading the administration down the wrong path on trade with China, said the source briefed on the trip.
Chinese officials signaled their distaste for Navarro, author of a book titled “Death by China,” according to a person familiar with the discussions.
At the urging of Navarro and other China critics in the administration, the U.S. is poised to hit China with billions in tariffs after an investigation in which China was accused of forcefully transferring sensitive technology and intellectual property from U.S. companies.
But Sunday, Trump signaled that he was beginning to back down from his tough stance. He tweeted that he was directing the Commerce Department to ease a 7-year ban on Chinese telecommunications giant ZTE doing business with U.S. companies because he was concerned about too many Chinese jobs being lost.
Mnuchin and other senior administration officials have been in direct discussions with the Chinese.
U.S. officials initially told the Chinese that they’d be open to granting some relief from the pending tariffs in exchange for a commitment to reduce the trade deficit with China by $200 billion over two years, according to an administration official. But the the Chinese have countered with a proposal to buy $150 billion in U.S. products instead, though the talks are still very much in flux, the official said.
Accused by Democrats of going soft on China and national security, Trump lashed out at the media on Wednesday in a series of tweets, accusing CNN and the Washington Post of writing “false stories” about the trade negotiations, which he said, “haven’t even started yet.”
The verbal barrage came one day after Senate Minority Leader Chuck Schumer and 31 other Democratic and one independent senator wrote to Trump urging him not weaken law enforcement penalties on ZTE in exchange for trade concessions.
“ZTE not only violated U.S. sanctions law (by selling U.S. telecoms equipment to Iran and North Korea), but then repeatedly lied about steps it would take to remedy the problems,” the senators said. “America’s national security must not be used as a bargaining chip in trade negotiations.”
The U.S. and China have already held one round of talks two weeks ago in Beijing, where they exchanged lists of demands. On the Chinese side, that included “appropriately dealing with the ZTE case,” according to an unofficial translation.
Commerce Secretary Wilbur Ross imposed the ban last month because ZTE violated the terms of a $1.19 billion penalty agreement that was announced last year. That prompted the Chinese company to announce last week it was ceasing business operations.
After Trump’s tweet on Sunday, Ross said the Commerce Department was “very, very promptly” exploring alternative ways of punishing the companies.
But Trump’s tweet on Wednesday seemed to indicate there would only be relief for ZTE if China and the United States reach a larger trade deal. “Nothing has happened with ZTE except as it pertains to the larger trade deal,” Trump said.
China also wants the United States to back off its threat to impose tariffs on $50 billion to $150 billion of Chinese goods, ease controls on exports of high-technology goods to China and reduce barriers to Chinese investment.
In addition to its request on the trade deficit, the U.S. asked Beijing to stop subsidies for high tech sectors such as robotics and aerospace that are targeted for development in the “Made in China 2025” plan and to promise not to retaliate against U.S. farm goods for any tariffs that the United States might impose.
This week’s talks are taking place against the backdrop of three days of hearings on the administration’s plan to impose tariffs on an initial $50 billion worth of Chinese goods to put pressure on China to do a better job of protecting U.S. intellectual property and to halt practices that force American companies to transfer technology.
Close to 125 witnesses are scheduled to testify at the hearings, which conclude on Thursday, in a sign of the concern in the U.S. business community over the administration’s move. However, some witnesses are also using the opportunity to ask the Office of the U.S. Trade Representative to include additional items on the list.
Trump has threatened to expand the list of targeted Chinese goods to $150 billion – which potentially could cover everything the United States imports from China, since those imports totaled $130 billion last year. However, U.S. trade officials said if they take that step they will hold a second public comment period and hearing.
Barring a major breakthrough in this week’s talks, tariffs on the initial $50 billion worth of goods could go into effect in the coming weeks or months. However, the administration has not publicly stated a time frame for when it will make its final decision.
Ahead of the meetings at Treasury, the Chinese delegation has been meeting with lawmakers on Capitol Hill.
Liu told one group of House lawmakers in a meeting Wednesday that he “recognizes there are problems” in the U.S.-China trading relationship, according to House Ways and Means Chairman Kevin Brady.
“His hope for this trip was to begin to address the trade imbalance, increasing demand of Chinese consumers for U.S. products as well as to begin to take steps on the structural reforms that have been raised,” Brady said after a roughly 45-minute meeting with the Chinese delegation.
Erin Ennis, vice president at the U.S.-China Business Council, said it was unclear whether major progress would be made.
“From the two documents that were exchanged a couple of weeks ago, they seem pretty far apart and we don’t know what revised offers have been made at this point or if they’ve narrowed or changed the list. So, it’s really hard to know at this point what to expect from an outcome because it could be anything – or nothing, I guess,” she said.
Adam Behsudi and Quint Forgey contributed to this report.