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U.S. Trade Deal with EU Raises Hope of Progress with Mainland China, Other Trading Partners

President Donald Trump held a joint meeting with European Commission President Jean-Claude Juncker on 25 July to announce that the European Union had agreed to purchase more U.S. soybeans and liquified natural gas and launch discussions on a possible agreement for reciprocal duty-free trade in non-automotive industrial goods.

Many questions remain about the specifics of the announced commitments, however. For example, no details were provided on EU rules regarding genetically modified organisms, which have previously limited U.S. soybean sales to the EU. Moreover, the liquified natural gas sales would require developing certain terminals/infrastructure in EU ports and it is not clear how either the United States or the EU would authorise any agreements that require legislative approval, as would be the case in the United States if any tariff rates are changed. A significant degree of optimism was nonetheless expressed at the joint White House session, as Juncker noted that “as long as we are negotiating, unless one party would stop the negotiations, we will hold off further tariffs, and we will reassess existing tariffs on steel and aluminium.” This appears to mean the United States would not increase tariffs on automobiles and auto parts from the EU if an on-going Section 232 investigation finds that imports are jeopardising U.S. national security.

On 26 July, U.S. Treasury Secretary Steven Mnuchin gave an interview to the CNBC network in which he followed up by praising the effort with the EU. In reply to a question about mainland China, Mnuchin stated that “we're available any time […] so there continue to be some quiet conversations.” He added that the Trump administration is “prepared if they're going to make serious moves to negotiate.”

Meanwhile, 20 Republicans on the key House Ways and Means Committee sent a letter to President Trump on 25 July urging the president to meet directly with mainland Chinese President Xi Jinping “to begin crafting an historic new solution on trade that levels the playing field between China and the United States for U.S. farmers, workers, and businesses.” The lawmakers expressed confidence that if Trump personally engages with Xi he would “reinvigorate the negotiations and develop meaningful solutions that will establish free, fair, and lasting trade between the United States and China and improve the competitiveness of U.S. companies.”

The Republican lawmakers reiterated their commitment to the administration’s goal of achieving “long-term and enduring reform in Chinese subsidies, tariffs, and other trade barriers” but suggested that it is time for an alternative course of action to the current “destructive cycle of escalation.” Trump should therefore take advantage of his “strong and personal relationship with President Xi” to negotiate an “ambitious and enforceable agreement” with mainland China in a “timely and astute” fashion. The lawmakers also expressed their willingness to work together with the president in the very near future “to accomplish this bold but necessary goal.”

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