China Deal May Be Slipping Out of Reach, Expert Says
A reportedly rescinded invitation to Chinese Vice Premier Liu He to come to Washington Jan. 30 could mean "the U.S. and China have not been able to agree on the hard issues, the structural issues," said David Shear, a senior adviser at McLarty Associates. Shear, a former ambassador to Vietnam, also served at the U.S. Embassy in Beijing and was a senior official on the China desk at State in his foreign service career. Shear, who was reacting to a Financial Times report Jan. 22 saying the Chinese delegation was uninvited, said, "Last week appears to be [Treasury Secretary Steven] Mnuchin's week. This week is [U.S. Trade Representative Robert] Lighthizer's week." National Economic Council Director Larry Kudlow told CNBC that the report is not true.
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Shear said that he never expected there to be a full deal on March 1. However, "at the end of last week, I was thinking maybe there's a March 1 deal in which China announces more purchases of agriculture and manufactured goods and we all agree to keep talking about the hard issues," he said, with some verification measures spelled out. Now, he thinks there will just be a new deadline announced pushing the confrontation date out past March 1. He said he thinks it's unlikely that the current 10 percent tariff will increase to 25 percent after the deadline comes and goes without an agreement. "I think the president is afraid of how the market will react," he said.
Shear said many of McLarty's clients are trying to find countries outside of China to shift supply chains to. "Some are just too entrenched" in China for that to be feasible, he said. Others will send some production designed for export to other countries, and keep production in China for the Chinese market. But the question is, where can the production go? "Vietnam is at capacity," he said.