MNI INTERVIEW: US Exemptions May Defuse China Trade Dispute

     BEIJING(MNI) - The U.S. may choose to make further tariff exemptions as it

moves to defuse its trade dispute with China, a former senior advisor to the

People's Bank of China told MNI.

     In two rounds, the U.S has so far excluded a total of USD12.12 billion

worth of goods from tariffs it imposed on USD50 billion of imports from China,

according to China Academy of Social Sciences, China's top official think tank.

     U.S. President Donald Trump may calculate that it is politically more

expedient to grant further such exemptions than to be seen to be rolling back

the tariffs aimed at Beijing, said Yu Yongding, a senior fellow of the CASS and

a former member of PBOC's monetary policy committee.

     --ECONOMIC PRESSURE

     "This may be the only likely way of reaching a resolution at present, since

the Trump administration will not make concessions under political pressure," Yu

said in an interview, adding that he expected a partial deal to de-escalate the

dispute, with both nations feeling economic pressure after two years of trade

war and softening global trade flows.

     He was less optimistic about the later, so-called "phase two" and "phase

three", talks which would follow a partial deal. These would address China's

subsidies and industrial policies, which it regards as a sovereign matter and

not in violation of international rules, although Yu said Beijing might be

prepared for discussions in some areas. Yu added that China's industrial

policies need to be improved, and gave the example of its solar panel

manufacturing sector, which has crowded out global competitors.

     The two sides should put more difficult issues to one side and focus on

areas where compromise is possible, the economist suggested. Currently, they are

probably working on details of China's promised purchases of U.S. agricultural

goods, he said.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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